The perception of family businesses as patriarchial needs to change. Mike Fahy reports..

The image of family businesses as old, stuffy organisations where promotions are made on the basis of who (as opposed to what) you know is changing. Family firms still make up as much as 85 per cent of companies across Europe, according to the BDO Centre for Family Business, and they are prepared to be much more open in their approaches to recruitment, financing and several other business-critical areas.

For instance, the old notion of family firms rejecting outside capital for fear of diluting their ownership appears to be falling by the wayside. According to a recent survey by KPMG Corporate Finance, family firms now appear more willing to sell to trade buyers or private equity houses than pass their businesses through another generation. Some 62 per cent of the family firms surveyed said they’d be inclined to sell if a good enough offer came along, and a third of family owners who had offloaded their businesses within the past two years said money was the main motivating factor for doing so. Given that private equity firms are busy raising record levels of funding, increasing numbers of family businesses could find themselves being made an offer they can’t refuse.

For instance, Salford-based recruitment firm Morson became one of a growing number of family-owned firms to chance its arm as a publicly-quoted company last year after floating on the Alternative Investment Market in June. The business, which generates revenues of over £265 million a year, was started in 1969 by chairman Gerry Mason and has been run since 1999 by his son, Ged. At the time, Ged secured funding from Barclays Private Equity to complete a formal management buyout, which gave Barclays a majority stake in a deal that valued the firm at around £54 million. However, following disagreements over strategy, Mason and his fellow directors raised enough cash to buyout his backers at the end of 2005.

The Ainscoughs have also been prepared to offer minority stakes in the crane hire business to incentivise its management – “It means we’re all working towards the same goal, and what’s a business for if it isn’t about making money?” – but he sees plc status as something which could be restrictive, stating that family ownership “allows us to be more flexible”. “You can decide not to take any money out or even put more in if that’s what the business needs. It allows you to do things for the long term,” he says. This is something that Andrew Rushton – the managing director of Manchester-based J Allcock & Sons – knows all about. This family-owned rubber recycling firm has been in business since 1924 and was taken over by Rushton’s father in 1972. However, it has experienced some hard times over the past 15 years – the worst being a fire in 1992 which nearly devastated the plant.

He explains, “We only just survived from that and rebuilt, but we then had a couple of other fires as local kids started fires using some of the scrap rubber in the yard.” The Rushton family have gone for years without taking dividends out of a business and Andrew says he earns around a third of the wage that he could in a similar role working for a competitor. He chooses to do this, though, in the knowledge that it may eventually offer a rather more substantial payday. For instance, since taking charge in the late 1980s, there has been some heavy investment in the recycling arm of the business, including the acquisition of another family firm, Leeds-based Wellington Rubber. He has also spent heavily on achieving quality assurance status for many of his products. He argues that rubber recycling in itself is a niche sector and within it are a number of firms with a reputation for cutting corners – or “Boys from The Black Stuff” operators, as he calls them. By guaranteeing product quality (J Allcock was the first UK-based rubber recycler to achieve ISO 9001-2000 status last year), he can charge a premium for high-performance compounds used in engineering parts.

“It’s not a very big business in terms of volumes, but it is quite a specialist niche and the market is moving this way,” he says. “We won a contract last year to handle all of the waste from one of the top ten non-tyre rubber manufacturers’ European plants – about 70 tonnes’ worth of material.” This will help to build turnover from its current level of £1.8 million to nearer £3 million by 2008, and Rushton hopes to be able to build profitability to a level where the business’s value increases enough for the family to consider a sale to be worthwhile. In the meantime, he has two sons (one of whom has just secured a university scholarship from Deloitte) who could be in a position to join the business in a few years but, after putting so much effort in himself, he feels there are easier ways for them to make money. “I’ve just told them to go and do what they enjoy. They’ll probably make far more doing investment banking or something than coming here.”

Sometimes, though, the lure of a family business proves too tempting for even the most career-minded of individuals. Mathew Mooney, for instance, had managed to get ahead in advertising – starting out at Macclesfield-based McCann Erickson and eventually rising to chair the management board at Manchester-based agency MAP. He had been offered a job in Edinburgh in 2000, which caused him to “have one of those reviews of my life” which ended up in him returning to his family’s restaurant business in Knutsford instead, sensing the opportunity to create a bigger and better business than they had.

His mother and father had taken over Belle Epoque – a fine dining restaurant with six adjoining rooms – after his uncle was killed in a car crash in 1975. His brother David, who had trained as a chef under Raymond Blanc and Marco Pierre White at Le Manoir Aux Quat’ Saisons while in its 1980s pomp, had joined the firm in the late 1980s after a spell in France and, although the business had ticked along, it was in danger of becoming the kind of lifestyle business that people associated with families. “The restaurant had been coasting and it needed knocking into shape,” says Matthew. “I was welcomed with open arms at first, but after a while I developed this reputations as a bit of a Sergeant Major.”

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