Family companies more open to private equity

‘Keep it in the family.’ The time-honoured motto of family companies has applied less and less in recent years, and that includes their funding. “All around us we see increasing transparency and openness to the outside world, and family companies today are not immune to this,” says Peter Maenhout, Head Connected Consumer at Gimv. Recent research in cooperation with our Chair Partner provides a nuanced picture of family companies and their attitude to private equity.

“The family company does not exist,” says Jeroen Neckebrouck. Jeroen has been conducting research into the impact of external investors (private equity) on the growth of family companies since late 2014, for his PhD thesis. “In addition to the economic value that families attach to their company, socio-emotional value also plays a role. This value has more to do with family objectives, control, identity, management, succession etc. Our research shows that the significance of this socio-economic value varies between different family companies. We do see a correlation between the socio-emotional value and the family company's attitude to external investors: the lower the socio-emotional value, the more open a family company is to these investors.”

Jeroen Neckebrouck, PhD student: “The lower the socio-emotional value, the more open a family company is to these investors.”

Familiar with culture and values

It is also important for the external investor to be familiar with the culture and values of the family company. “That is almost as important as knowledge of the business as such,” Jeroen emphasises. “Absolutely,” agrees Peter. “In practice, it is often the case that family companies consider bringing in private equity at a key moment for their company, such as a new generation, the decision to go international, a changing market – the latter is also taking place at an increasingly rapid rate. At a time like this, it is a good idea for the manager of a family company to test this kind of strategic decision against the experience of an external party, determine the strategic direction of the business together and – very importantly – document clearly what the ambitions of the company are. A successful private equity minority stake in a family company is more than an injection of external capital, it also represents openness to dialogue, reaching a consensus and making the right choices together.”

Peter Maenhout, Head Connected Consumer at Gimv: “Accepting help from an external party in a strategic choice and reaching a consensus is the key to success.”


Despite a number of inspirational examples of Belgian family companies that have been able to make their business evolve as they had hoped thanks to private equity, the average Belgian owner of a family company is still too often distrustful of ‘external lenders’. “When asked about their preferred type of investor, only 8% of family companies in Belgium answer “private equity”, whereas this percentage is 30% in the international group,” says Professor Sophie Manigart, who has supervised the Chair with Gimv from the start. “And that is unjustified, especially when you consider that both the number of providers of private equity and the capital that they represent is increasing exponentially. The impact of private equity on the family company is also positive, as our previous research has shown: employment in family businesses grows faster after they have received private equity.”

Sophie Manigart, Professor in Entrepreneurial Finance: “Belgian family companies are less open when it comes to external investors than their counterparts abroad.”

Positive evolution

In practice, Peter sees a positive development, “but it is indeed over the long term. After the financial crisis, the banks were much less inclined to provide credit and family companies had to look for alternative forms of financing. But it would be incorrect to claim that family businesses have become more open to private equity purely out of necessity. On the contrary, from a business perspective, it is very beneficial to be able to rely on the long-term financing that private equity represents. At the same time, it offers the opportunity to secure part of the equity and create a higher degree of flexibility and comfort in a more difficult period. Finally, we can also see that, in general, management has become much more transparent over the last 10 years. Moreover, this openness has become self-evident within families, with younger generations and younger employees. As an investment company, we can only welcome this, as openness is the key to success.”


Award-winning study into family companies.
Since late 2014, Vlerick has been researching the effects of private equity on the growth of family companies as part of the Chair Partnership with Gimv. The first component, ‘Private equity, HRM and employment’, investigated the impact of private equity on employment security and working conditions in family companies. “On average, we found that, in Belgium, private equity has a positive effect of 15% on employment,” Jeroen Neckebrouck explains. “When we compare private-equity backed companies with a reference group of comparable companies, taken at the time of investment, we can see that, in the period after investment, the number of employees in the private equity-backed companies increases by 15% more in comparison with the reference group. This positive effect is identifiable in both the short term (two years after investment) and medium term (5 years after investment).”
Last year, Jeroen Neckebrouck received the RENT award for the ‘best doctoral proposal’ for this study.

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