by Real Business - Thursday, 30th August 2007

While some family businesses fiercely guard their heritage from outsiders, others take to the open market. Often, the family stake is diluted, but do the benefits outweigh the losses?

Pochins, a Cheshire-based building contractor, may be a quoted company, but it’s also a family firm. The Pochins still own 60 per cent of the firm after 72 years. Director David Pochin has only ever known his family business as a plc. Post-IPO, did Pochins hold on to its family values? “Pochins was listed 35 years ago. Private or not, we are still a family firm.”

The Pochins have a controlling stake, but being a family plc has its dangers: “Shareholdings get more and more watered down, and there’s no guarantee that future generations will want to work in the business,” says Pochin. “Those shares will go adrift or be sold on by my family members; we could be bought up by a private institution. Family businesses face these risks.” Ensuring a family succession would surely result in a more stable future for the company, but there are no mechanisms in place to guarantee that Pochins remains a family affair.

Despite his laissez-faire attitude toward succession, Pochin admits that it would be easier to be a private business. “We have a lot of rules and regulations to comply with,” he says, “And there is no question that business comes before family for a plc.”

Family plcs cannot avoid hanging their laundry out in public. Pochins’ annual report this year ran to nearly 70 pages – the level of transparency required of a plc. The document proves business is rosy. Turnover is up by 42 per cent to £124.3m in 2006 and pre-tax profits have climbed to a record £9.2m.

A dark horse

An IPO doesn’t always ensure transparency. Dunelm went public in October 2006, but the family still keeps a low profile. Reports show the company is doing well.

Turnover for 2006 was £315.2m, up from £282.5 in 2005, and pre-tax profits are up ten per cent to £38m.

There’s no question of who’s at the helm: the family still controls 67 per cent of the company. Succession is being assured through the transfer of shares from father to son. Chief executive Will owns 25 per cent of the company, after his father gave him 20 million shares last year.

FTSE fledgling Ben Bailey, Yorkshire’s oldest house-builder, is on the brink of passing out of family control after 74 years.

A spokeswoman revealed an imminent takeover earlier this month. With sales of £122m in 2006, up 25 per cent on 2005 and profits of £16m, the company is in rude health. For chairman Richard Bailey and his son, Jon, this takeover could mean the end of the line for the illustrious family firm. Unsurprisingly, they were unavailable for comment. Robin Barr of AG Barr does not like to talk about the family aspect of his Irn-Bru empire. The 69-yearold executive chairman has been there for more than 50 years, and it was on his watch that Irn-Bru became the first soft drink to outsell Coca Cola in Scotland. The company’s sales hit £128.7m last year with profits of £17m.

Barr may well be “made from girders”. In 2004, he bypassed his daughter, Julie, who works in the marketing department, and named outsider Roger White as chief executive.

Family businesses all have their troubles. Being listed need not be one of them. Sure, it means that every decision must be in the interest of the business. It means that family members have to outperform their peers to progress in the company, but that is as it should be.

As firms like Pochins continue to prove, as long as the family wills it so, blood is thicker than water.

Tags: pochins, floating a business, jon bailey, succession planning, family firm, going public, richard bailey, family business, property, building, irn-bru, ben bailey,