Avoiding the exit route

http://www.ifb.org.uk/How does Germany retain its global market share in manufacturing while other European rivals such as the UK, France and Italy have gradually been losing ground to China and others.  Obvious answers include a consistent focus on achieving productivity gains through investment in equipment and human capital, as well as keeping ahead in product development through R&D and innovation. Successful Mittelstand companies prioritise the continued existence of the company- making necessary investments.

This approach starts with owners who put business growth and continuity as top priority. Eschewing cashing in on their achievements they chose to remain privately owned. These owners provide consistency of purpose and stability; making relatively small liquidity demands on the company they send a signal through their boards that the company comes first. Freudenberg Group is a typical example of this approach; where family shareholders prefer to keep their assets tied up in their successful Eur6bn firm putting family ownership as a high priority rather than letting other people manage their money.

The UK Government’s new focus on mid-sized business expressed through various reviews including the latest one led by Lord Heseltine is a sign that the UK is increasingly recognising the importance of our own Hidden Champions. As in Germany family firms are the most common form of ownership in this sector of the market- their success is thus one of the key planks for driving national growth. To win back a strong position the UK will require a new generation of owners who put the success of their companies above making short term gains through managing a quick exit.