The resilience of hereditary franchises is illustrated by “The Firm”, as the Royal Family sometimes calls itself. The Queen, who celebrates her 90th birthday on Thursday, has taken care of business for 64 years. The quoted-company sector might flourish if family control were tolerated there too. That is the takeaway from a London Business School paper written for MPs with support from asset manager M&G.
The report trots through familiar badlands in describing a 46 per cent slump in the number of companies with a full UK listing since 1999. But in diagnosing the problem, researchers place unusual emphasis on barriers to flotations by family-owned businesses.
One of these is an expectation that British families stand to lose control of their corporate fiefs. In Germany, Italy and France, genetically empowered bosses are more likely to remain in charge. The UK has a busier market for company ownership. Independent investors are more likely to resent family influence at large quoted companies such as Schroders, Berkeley Group and Dunelm.
The prejudice becomes a rational objection if the wrong managers are appointed because they have the right DNA. One thinks of the colour-blind paint shop boss employed by one historic engineering group.
McKinsey has previous for belabouring family-owned companies for supposed inefficiency. However, according to the LBS report, the management consultancy concluded last year that, while selling a minority stake raised returns, they slid again as families slimmed holdings.
The sweet spot was identified with spurious accuracy as 67.5 per cent. That is a level of family control at which corporate-governance fundamentalists blench. They should relax. Businesses run by entrepreneurs and their descendants have a place on the market alongside the kind ruled by career administrators. Elizabeth R would likely perform poorly at a Heidrick & Struggles executive interview. But no one can fault her long-term vision.
Associated British Fabs
But investors don’t care about “protein extrusions”, whatever those are. They want sex, drugs and rock ‘n’ roll, or the closest thing in Weston world. This is Primark, the fast fashion group that is giving Zara an athleisure wear-clad run for its money.
Investors hope Primark can crack the US, like the Fab Four. Two new stores there are trading well, including an outlet in a landmark building in Boston. Mr Weston expects Primark to open 1.4m square feet of new space this year worldwide, a record.
The store chain’s first-half operating profits fell slightly to £313m on sterling weakness. Longer-term, Primark should continue driving earnings growth at ABF. So the news that ABF’s sugar division is in better shape is like hearing Liam “Boring” Payne from One Direction has beaten his sniffle and can make the Wembley gig.
All for one and one for all is Mr Weston’s motto as band manager. Investors might rankle at the conglomerate structure of this family-influenced group. But it has conferred stability the freestanding components would lack. As for the shares, if you bought a while ago, hold them with the tenacity of the owner of a collection of early Beatles fanzines. But at a forward earnings multiple of 33 times, there is little short-term headroom.
Ex-Bank of England governor Mervyn King recently became a director of Aston Villa. Lombard TalkSport’s top match commentators were there to report.
Gary Liniment: Expectations are sky high here at Villa Park as the latest signing runs into the boardroom. Isn’t that right Ron?
Ron Manager*: Mmm. Shades of Micah Richards. Eh? What?
GL: This great club is in the relegation zone, just like the UK economy when macroprudential midfielder King saved it in 2008. Can he pull off the double?
RM: Horses for courses, Gary. Isn’t it?
GL: We’re seeing some good opening play. King’s raised a clever debating point. He’s passed it to Bernstein, who’s passed it to owner Randy Lerner . . . who isn’t there.
RM: Gabby Agbonlahor. Shisha pipe. Dubai nightclub. Lamentable.
GL: Now they’re making a substitution. Squire Patton Boggs is replacing Baml in the demanding role of M&A adviser. What difference will that make?
RM: About £75m off the asking price?
GL: Incredible scenes here as Bernstein storms off! Now King is throwing his tabard at the chairman! Almost as if these ex-bosses are piqued to realise they were corporate window dressing!
RM: Little boys in the park. Jumpers for goal posts. Tears before bedtime.
GL: For once, Ron, you’ve nailed it.
*With apologies to Paul Whitehouse