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Why is family business still so popular in France?

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Family businesses are the oldest kind of companies in the world. For centuries, it was believed that the money is better kept in the family. Now, it is often stated that family companies usually do not go beyond a small business and do not last long because of owners' voluntarism. Both statements are wrong.

One just has to look at the data, gathered all around the world. Nine hundred and twenty family companies, analyzed in The Credit Suisse Global Family 900 ranking, show excellent statistics - 47% outperformance compared to the benchmark MSCI ACWI index.

The family-business model takes its rise at the heart of Europe - particularly, in Italy and France, where strong family ties have always been of great importance. A series of economic and political upheavals that have taken place in the past centuries forced some businesses to shift to self-financing, henceforth proving the idea extremely successful.

Particularly, this tendency has been traced in France, where 65% of the companies are family-owned. They pop up here and there, starting with modest bakeries and private vineyards and ending with huge industrial giants and haughty luxury brands, coexisting peacefully side by side.

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The oldest - and perhaps the most pompous of French family enterprises - is a winery Chateau de Goulaine. Incidentally, the company is included in the list of the world's oldest companies. Today, Goulaine family, which have been landowners for almost a thousand years, can be proud of having one of the oldest names in the world, engaged in the production of wine.

The roots and family history of Goulaine are an integral part of Loire Valley legends, its castles and wines. In France, they say that Marquis de Goulaine wine is a reflection of identity, history and heritage of one of the noblest French families. These days, Robert de Goulaine carries on the tradition. He personally supervises the production of wine at all its phases, from the selection of seeds and planting to harvesting and bottling.

Very well, a luxurious and ornate family-business story has a beneficial effect on wine sales -- is here anybody who wouldn't like to have a taste of wine, made out of grapes, harvested in the vicinity of a famous French castle under the control of a Marquis? But what about the others?

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Let's go back to luxury. A long-term investment is the best strategy for a luxury brand. Hardly every company can afford this, whereas in contrast, the business cycle of family businesses is less volatile.

This can be demonstrated by comparing growth rates of family and non-family businesses. Starting in 1995, sales growth in family firms has been more stable, including in 2001-2002, when the dotcom bubble burst, as well as during the 2008 financial crisis. In either event, family enterprises showed modest maximum and minimum values -- but have eventually won due to stability, that is, a kind of airbags.

Elisabeth Ponsolle, chief executive of French luxury goods association Comite Colbert, whose members include Chanel, Cartier and Hermès, says:

- If they need to invest for 10 years without receiving a financial return, they do it, like Bernard Arnault at Dior. He invested, and invested, and invested ... investment funds want a return in six months and a sale in three years. Brands talk about having been founded in the 18th, 19th or 20th centuries and having a history, but it takes time to develop a brand and you need to invest in the long term to do that.

Indeed, Mr. Arnault can afford a long-term investment. He is the owner of Louis Vuitton - Moet Hennessy Luxury Empire, which covers 60 well-known brands (Dom Perignon, Bulgari, Fendi, Sephora, etc.).

Public now, LVMH had long been a family business. The heir to the fortune, scrapped up on construction industry by his father, Bernard started his own business in 1984, when bought the rights to operate several fashion brands, including Christian Dior, for $ 15 million. Current business revenue is estimated at $ 40 billion, while operational management is gradually being transferred to the children, Delphine and Antoine.

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Family businesses are pretty much independent of the restrictions applied to their competitors, public companies, whose shares are traded on stock exchanges, required to submit quarterly reports on its activities, and are in need of a quick payback.

This is crucial in relation to industries such as high technology and latest developments. Family companies' investments in research and development showed themselves effective in relative terms, despite the lower absolute levels.

An excellent example here is the French Oberthur Fiduciaire - a security printing company founded in 1842 by François-Charles Oberthur, specializing in banknote-production process, including design and creation, origination, prepress, quality control, printing, finishing, delivery, and traceability. Its know-how protects banknotes from the threats of counterfeiting; and Oberthur Fiduciaire provides services to protect cash, checks, vouchers, and stamps from various types of fraud. The industry is quite specific and requires constant development and improvement - in the broadest sense, this is a combination of high technology and long-term, carefully cultivated design and tradition as explains the CEO of Oberthur Fiduciaire, Thomas Savare.

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