Family Values Vital To Successful Corporate Marriage

Selling the family home is an emotionally charged process at every stage. Besides concerns about the new owners and any changes they might make to the property, family members may disagree on how to handle the many financial aspects of a sale and these disagreements can have a negative financial impact. Research shows that homes sold by estates tend to sell at a discount to comparable homes on the market, largely because the sellers are making decisions with their hearts instead of their heads.

You can easily imagine, then, what happens when the owners of a family business decide to sell. The emotional issues are similar however the stakes are significantly higher, amplifying potential disagreements and financial issues among family members. When buyers are tone-deaf to these issues it can derail a deal .

Both China and Europe have a significant number of family businesses for which M&A is an attractive option right now, due to the current economic environment. Therefore it is important to understand how family dynamics can affect these deals. Many Chinese enterprises are now at the development stage where M&A offers the best option for expansion and globalization, while at the same time the economic downturn in Europe has led many companies there to consider M&A as a solution to market threats. Foreign exchange rates make European companies especially attractive acquisition targets for Chinese.

As increasing numbers of Chinese companies look at merger and acquisition targets abroad, the importance of good governance practices comes increasingly into play as good governance is the rule of the game in the international market. If Chinese companies want to be major players in a foreign market they need to comply with the rules of the game , which means strong corporate governance, respecting all stakeholders including employees, labor unions and the community where the company is located. Acquiring companies also have to respect other countries’ cultures and legal systems.

Chinese entrepreneurs looking for opportunities abroad are also discovering that the M&A game works differently than it does in China. In China, you play by price or by money, but in a well-developed market, money is not the only factor . Yes, money/price is important but it is not the key factor. When targeted firms want to sell their assets or corporations, they tend to want to find another company that shares similar values or philosophies. This is especially true with a family business. This is because they want the brand or enterprise they built to be there for many years to come, even if they are no longer interested in operating the business themselves. They want to put the assets in the hands of people they can trust, people who share a similar culture or value systems.

by Prof. Oliver Rui