Preserving the soul in family business succession: how do you do it?

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Bolster Investment Partners is a long-term investor in family businesses, acquiring both minority and majority stakes with a unique portfolio of 20 Dutch b2b companies, they have gained substantial experience in finding successors for Director Major Shareholders and family businesses. This succession is often one of the reasons why companies enter into a long-term partnership with Bolster.

But how do you ensure a good succession without losing the soul of the company? We put this question to Mark van Rijn, Managing Partner & Chief Investment Officer at Bolster.

Not for the short term

"We still sometimes have to overcome some scepticism when we show interest in a new company," says Van Rijn.  "People often read about extreme cases in the news where aggressive investment firms acquire a company, break it up, and strip away its essence. Fortunately, people quickly realise that we are in it for the long haul."

Because Bolster invests for the long term, the acquisition process often involves a long run-up. Bolster wants to truly understand a company and the sector in which it operates. "That means several years of coffee meetings to get to know each other," Van Rijn says. "That's a very different strategy from the buy-and-build strategy we use for some companies in our portfolio. To stay as informed as possible about everything happening in the market, we have lots of conversations, read research reports and use Dealsuite. Having a strong network is important in our field, but so is good tooling."

Different motivations for an investment partner

According to Van Rijn, there are three reasons why companies are interested in selling some of their shares to Bolster or one of the companies in their portfolio. The main reason is often the succession of the current Director Major Shareholder. Additionally, realising the value tied up in the company can also play an important role Of course, there are also many companies with growth ambitions for which they need capital that can be found from investors like Bolster. 

"Often it is a combination of these factors," emphasises Van Rijn. "Because one does not exclude the other, of course. Whatever the motivation, we can use our expertise to support entrepreneurs with financial resources and business experience."

No one-size-fits-all answer in the transaction

When executive succession is (part of) the question of the party Bolster is investing in, there are several options. Is there a candidate available internally, or would it be better to have someone from outside the organisation take over from a Director Major Shareholder? But the question goes much further than this, Van Rijn believes. "At the time of the transaction, we often have no ready-made answer to the succession question at all. Then we still know relatively little about the company, the entrepreneur, or the family. We really have to spend some time on the road together as co-owners before we know what the best route is."

The first step is always a comprehensive and clear introduction to everything and everyone who has anything to do with the organisation. "That does not mean that we also get involved with the organisation's product or service, but we do get involved with the structure," Van Rijn emphasises. Since many things are built around a Director Major Shareholder, Bolster first examines how everything is organised. 

If necessary, the structure is slowly adjusted so that the business benefits from it within three to five years. "So that means we don't just find a replacement overnight and put it in place," Van Rijn says. "Practically, that’s not feasible, as too much knowledge and experience would be lost. There’s also a high chance of resistance within the organization, and the soul of the company could be lost. We certainly want to prevent that."

Recruitment is also a process that takes time

In most cases, Bolster first considers whether there is a suitable candidate within the company for succession. This is often quickly apparent, and internal candidates are generally preferred over external candidates. "We like to take our time for this too," says Van Rijn. "Sometimes internal candidates first have to get used to the idea that a management position is for them."

Clear communication is also crucial in a succession process. “We have to be clear. We understand that most people are not waiting for change. We explain what is going to happen, why and how. If people do not know what to expect, you will not gain their trust.”

Besides clarity, Van Rijn says clear organisational structures are also very important. "From prices to special conditions; many agreements are often in people's heads. That has worked well for years, but when a follow-up process starts, we need to make sure that this information ends up in systems as much as possible, to ensure sustainability for the future as well. This requires discipline and structure; again, we cannot afford to do a half-hearted job here either. "

Keep the soul of the business

Although Bolster currently has 20 very diverse companies in its portfolio, there is a common thread in how they work with these companies. "We really are a sparring partner, without pretending to have all the answers. We don’t take over the entrepreneur’s role because there’s a reason the business has grown and become successful. The success formula of the company must remain intact."

It is about balancing the existing culture and values, and the new structure. Only in this way the soul of the company can remain. That also means taking time to implement that step by step with attention and discipline. "The same applies to changes at the executive and management levels," Van Rijn says. "We proceed very carefully and avoid making too many changes at once." 

About Bolster Investment and Dealsuite

Bolster Investment Partners is a flexible, long-term investor. Specialised in partnerships with Director Major Shareholder-led and family-owned companies through minority and majority stakes. Bolster invests in exceptional Dutch companies with a sharp focus and a proven business model.

To find and track these exceptional companies, Bolster uses Dealsuite. But also to help Bolster portfolio companies with their buy-and-build strategy. This leads not only to interesting conversations, but also to successful conversions.

Get in touch with Mark van Rijn from Bolster Investment Partners trough Dealsuite here.

Not a member yet? Book a Demo today to find out how you can benefit from Dealsuite.

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