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Family Businesses – Identity and Pressure to Grow
Family-owned businesses think in terms of generations, while private equity funds often plan for an exit after four to six years. This differing perspective on time creates tensions—but also opens up opportunities: financial investors bring capital (ideally exceeding the purchase price), networks, and a drive toward professionalization. It is crucial that both sides clarify early on which strategic goals are to be achieved within what timeframe and how a future sale will be structured.
Family-owned businesses are far more than just a legal structure; they embody a network of entrepreneurial spirit, loyalty to their location, and personal responsibility toward employees and the region—a network that has grown over generations. This unique identity is reflected in short decision-making processes, a long-term planning horizon, and often a strong sense of social responsibility.“Hidden champions”among small and medium-sized enterprises, in particular, combine technological leadership with a clear set of values and view the company as a legacy for future generations. At the same time, pressure is mounting to tap into international markets, finance digitalization initiatives, or expand strategic positions through targeted acquisitions (“buy-and-build”). Debt financing remains an option, but tighter credit conditions and growing investment needs are increasingly shifting the focus toward equity capital—even among entrepreneurial families who, just a few years ago, would have categorically ruled out a change in ownership.
From Distrust to Cooperation: Private Equity as a Strategic Partner
Traditionally, owner families viewed private-equity investors—sometimes with the support of certain political circles[1] —with skepticism. There was a fear that short-term return targets might overshadow social responsibility and cultural guidelines. Added to this was the fear of losing control, as many funds seek a majority stake in order to set strategic course independently. Nevertheless, according to a study by PwC[2], real-world experience shows a remarkable shift in sentiment: While in 2011 only 18% of the family-owned businesses surveyed were considering a partnership, this figure had already risen to 90% by 2023. The reasons for this include not only generally rising costs and more complex markets, but also compelling success stories. Most recently, for example, the partnership between Egeria and the traditional Lübeck bakery “Junge Die Bäckerei,”[3] which has been family-run since 1897, as well as H.I.G. Capital’s investment in the Heller Group, have caused quite a stir.[4] A number of financial investors are explicitly positioning themselves as partners to small and medium-sized enterprises (SMEs), often remaining engaged for several years and drawing on deep industry expertise. This gives rise to a new partnership dynamic: private equity brings capital, networks, and professional expertise, while the family contributes product and market expertise as well as cultural continuity.
Contractual Guidelines to Protect Corporate Culture
Such collaborations succeed primarily through precisely drafted investment and governance provisions. At the heart of these arrangements is typically a Shareholders’ Agreement, which is generally not published in the commercial register, thereby preserving confidentiality vis-à-vis the outside world. In such a Shareholders’ Agreement, for example, purchase and repurchase rights can be agreed upon to give the family the (long-term) option of regaining a majority stake, and business transactions requiring approval—such as strategic relocations, the dismissal of key personnel, or the sale of significant assets—that require approval. Likewise, binding growth and sustainability strategies, location guarantees, or debt caps can be stipulated. These examples illustrate only a fraction of the diverse structuring options through which a shareholders’ agreement can secure the family’s influence.
Another tool for protecting corporate culture is the establishment of an advisory board. Even if the financial investor often holds a majority of the shares and wishes to exert decisive influence over corporate decisions, an approval structure can be introduced whereby certain material actions—such as important personnel decisions, the launch or closure of business divisions, or location-specific measures—require not only a majority vote on the advisory board but also the approval of at least one family representative.
Finally, the careful selection of management is also of central importance. Private equity firms often rely on equity participation programs to incentivize their management teams and ensure the company’s long-term success. The family benefits from professional leadership without completely relinquishing operational responsibility, while the investor gains a highly motivated management team that understands and upholds the corporate culture.
Outlook: Preserving Tradition, Shaping the Future
The growing convergence between family businesses and private equity demonstrates that economic efficiency and values-driven leadership need not be a contradiction. Carefully drafted agreements, well-thought-out corporate governance, and a jointly developed growth agenda strike a balance between preserving heritage and driving strategic progress. For entrepreneurial families, it is crucial to articulate clear expectations early on, thoroughly vet potential partners, and openly identify cultural “no-gos.” Conversely, financial investors must accept that return targets must take the family business’s DNA into account. If these principles are observed, private equity can become a catalyst: The family retains its identity, while the company gains the capital and expertise needed to thrive in a global marketplace—a symbiosis in which tradition forms the foundation for new stories of growth and success.
This article was first published on May 27, 2025, on the GSK Stockmann press portal (online).
[1]“Locusts”—that’s what former SPD leader Franz Müntefering once called private equity investors.
[2] PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, “Private Equity and Family Businesses—Best of Friends?”, November 2023
[3]Junge Industrial Bakery Sells Majority Stake to Private Equity—we
[4]Heller: Family-Owned Company Opens Up to Investor H.I.G. Capital—wir
