Sonepar, a multinational electrical distribution company, likes to say that it makes acquisitions the family business way. They mean that long-term goals are emphasized, not short-term share performance. The strategy is likely to catch on with family businesses.
At the end of April Paris-based Sonepar bought competitor Rexel's business in Brazil, Chile and Peru for a reported €47 million. It is part of a recent spate of acquisitions, which have included several European and Asian firms.
Sonepar’s CEO Franck Bruel explains the philosophy behind the acquisition, as well as how it was financed. The two are very much interconnected. “Our group’s expansion policy has the abiding support of our family shareholders, and that is what made it possible for us to achieve this deal, because there won’t be a quick return on investment," he said.
"A key advantage of our ownership structure is that we can pursue a strategy grounded in a long-term vision that also includes profitability as a requirement, given that we finance our business out of our own resources.”
Sonepar can trace its roots back to the mid 19th century, but was formally founded in 1969 by Henri Coisne. It had annual sales of €17.2 billion in 2014 and a staff of around 40,000 based in 41 locations around the world. Coisne's daughter Marie-Christine Coisne-Roquette is the executive chairman of Sonepar and has always been keen to promote its family business credentials.
And this emphasis is indicative of how family businesses will increasingly position themselves when making acquisitions, say analysts. In a recent ViewPoint for Family Capital, professor Guido Corbetta of Bocconi University wrote family businesses are likely to make more acquisitions in the future, and that long-term family objectives will drive the strategy.
This trend, say analysts, is partly a reaction against traditional merger and acquisition strategies, which are often driven by short-term share price advantages; the egos of CEOs driving the acquisition; and banks which earn huge fees for advising on deals.
Studies have often shown that the value of such deals are questionable and often fail. Families may be showing the way to a new thinking on acquisitions which really do deliver long-term performance. Such a trend can only be encouraged.