BMW AG, Volkswagen AG and the Würth Group – household names in Germany and beyond – have one thing in common: they are all family-owned businesses.
Germany is home to around 2.9 million family-owned businesses, accounting for 90% of all businesses in the country. They generate around 55% of total annual turnover and account for 57% of all employment. 90% of family-owned businesses, many in construction and retail, are 'small', with an annual turnover of less than EUR 1 million.
But it's worth noting that 46% of businesses with annual turnover of more than EUR 50 million and 40% of listed companies are also structured as family-owned businesses. And the trend is rising. The total turnover of the 500 highest-grossing family-owned businesses increased from EUR 1,016 billion in 2011 to EUR 1,413 billion in 2020.
What is a family-owned business?
Depending on how you look at it, the definition of a family-owned business varies. From an economic perspective, a family-owned business has four key features:
- Families hold the majority of the capital or voting rights.
- Families exert significant influence on the company. This can be through management activities or decision-making rights, for example.
- The business adheres to certain values and is built on a corporate culture rooted in family preferences.
- Families wish to pass the business on to future generations.
It's this wish for continuity that drives the long-term perspective of many family-owned businesses. They regularly strive for economic sustainability to secure the continued existence of the business as the family's life's work.
From a legal perspective, meanwhile, a business is considered family-owned when family members consolidate their assets and business interests within a corporate structure. This allows them to exert a significant influence on the business's operations, primarily through their shareholdings.
However, it is important to understand that 'family-owned business' is not a legally defined term. Rather, it represents a real type that can take on various legal forms. Although this real type may harbor increased potential for conflict between (family) shareholders, the shareholders or family members also identify more strongly with their business.
Family-run vs. family-controlled businesses
A distinction is made between family-run businesses and family-controlled businesses: In family-run businesses, family influence is ensured by filling key positions at management level. Family members do not necessarily hold the majority of votes. In contrast, the entrepreneur family holds more than 50% of the voting rights in family-controlled businesses and therefore exercises direct control over key decisions.
Conclusion
In Germany, the economy is shaped by large, listed family-owned businesses, whereas in Italy it is dominated by a large number of SMEs. Both models share a desire to pass on their businesses from one generation to the next. The focus on sustainable growth, modern corporate management and cross-border growth are just as important as generational transitions. The law of family-owned businesses essentially ties in with corporate, inheritance, tax and family law issues.
Family-owned businesses in both countries have to overcome certain challenges due to the prevailing legal framework in each case.
This article is part of a multilingual blog series on German and Italian family businesses, created in collaboration with Valentina Dragoni and Martino Liva from Cappelli Riolo Calderaro Crisostomo Del Din & Partners. Learn more about the unique characteristics of Italian family businesses in Italian or English.
This article was written in collaboration with our research associate Tobias Marstaller.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
