Reinventing the Family Firm - Chapter 1


The heritage firm is what we typically might classify as a family’s traditional core business. In the author’s context this would be his ship-owning company, S. Ugelstad’s Rederi A/S. There is a huge variety of heritage firms. Just to give a few well-known examples: These include Victorinox, the Swiss-based maker of knives, suitcases, watches, and perfumes; AMAG, the Swiss-based importer and distributor of cars from the Volkswagen group (Audi, VW, Skoda, Seat, etc.); Norway’s largest tobacco firm, Tiedeman’s Tobakkfabrik; or Jotun, the large paint and coatings manufacturer. We will look at Jotun in more detail in Chapter 3 in the context of family governance. Often, we find that it is in such types of heritage firms where many business families start out, and thus where the bulk of their wealth was accumulated. This initial investment may at times be sold, with the family in some cases going on to make a series of investments, creating a family business portfolio. The author’s family firm, S. Ugelstad Invest (SUI), was solely a ship-owning company for some 80 years. Then the shipping company was sold and SUI in its present form was established. SUI maintains minority holdings in some shipping assets but is now active in five business areas, as described, actively managed by the owning family – the author and his two children. Developing a Portfolio Strategy When a business-owning family diversifies and creates a portfolio firm, typically proceeds from the sale of the legacy firm finance the investment for such a transformation (Widz & Leleux, 2019). Some families may sell their legacy businesses and, finding themselves with ample cash in hand, might fall into the trap of rushing into a number of new investments far too quickly, often with too great a financial commitment per investment. Due diligence may be lacking when reinvesting such a windfall. In addition, families in such a position may lack the competences necessary, and may struggle to manage their new portfolio business. On the other hand, it may also be that a portfolio opens up opportunities that suit a broader set of talents and interests from within the wider family. Managing a 100%-owned heritage firm typically requires specific skills and experience relating to a particular type of business. In contrast a portfolio business can offer a wider set of career options. Family members’ involvement might entail roles on subsidiaries’ boards and/or being advisors. These family members would typically have no specific line management responsibility, and little need for specialized functional skills. Therefore, it might be relatively easy for the next generation of family members to become involved in meaningful ways. A more realistic context for long-term family involvement might thereby have been created. Experience-building and learning seems to be particularly critical for family business portfolio firms. How can such a firm’s portfolio strategy be improved?


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