Case Study: Succession in an Industrial Family Business

Names, locations, and certain details of this case have been modified to protect the confidentiality of the parties involved. The figures and results are representative of the actual transaction.

The Starting Point

A family-owned company in the metal components manufacturing sector, founded in the early 1980s, with 85 employees and revenue of EUR 12 million. Four decades of history, a 68-year-old founder who had built everything from scratch, and one unanswered question: what comes next?

The founder had two children. The elder had worked in the company for fifteen years — he knew the factory, the clients, the processes — but had no formal business management training or experience in general management. The younger was a lawyer at a Madrid firm, with no interest in joining the company but holding a 25% stake her father had gifted her years earlier.

EBITDA was EUR 1.1 million — a 9.2% margin that had been 14% five years earlier. The decline was not due to market deterioration but to an accumulation of inefficiencies: a cost structure that had not been reviewed in a decade, a product line losing money that the founder maintained for sentimental reasons, and a lack of investment in machinery that was reducing productivity.

The founder recognised the problem. But he was tired, without the energy to undertake the necessary transformations, and concerned about the company’s continuity — especially for the 85 employees who depended on it.

The Challenge

The challenges were multiple and intertwined:

Ownership succession. The founder wanted to monetise four decades of effort, but without destroying the company. He needed liquidity for his retirement, but was unwilling to sell to a competitor who would dismantle the factory.

Management succession. The elder son had commitment and product knowledge, but lacked the general management capabilities the company needed. Appointing him as managing director without preparation would have been a mistake that family businesses make all too frequently.

Latent family conflict. The younger daughter, a 25% shareholder, did not participate in the business but was entitled to dividends and a voice in decisions. The absence of a family protocol meant every significant decision became an informal negotiation between father, son, and daughter.

Operational deterioration. The company needed investments — in machinery, in systems, in the management team — that the founder was not in a position to make.

Our Approach

We designed a three-phase solution that simultaneously addressed the succession of ownership, the succession of management, and the operational improvement.

Phase 1: Diagnosis and Design (months 1-4)

We conducted a complete diagnosis of the company: financial, operational, commercial, and organisational. In parallel, we worked with the family to understand each member’s expectations.

The diagnosis revealed what we suspected: a viable business with a solid competitive position, obscured by operational inefficiencies and a lack of investment. We estimated that, with the right improvements, EBITDA could recover to 14-15% of revenue — a potential EUR 600,000 to EUR 700,000 of additional operating profit.

We designed a structure that met everyone’s needs:

• Blue Mountain acquired 60% of the shares, providing exit liquidity to the founder and the capital needed for investments.
• The elder son retained 25%, joined the board of directors, and assumed the role of operations director (where he excelled) under a professionally hired external managing director.
• The daughter received a premium over the value of her 25% in exchange for her shares, obtaining liquidity and cleanly disengaging from the business.
• A shareholders’ agreement was established governing the governance, dividend policy, minority rights, and exit mechanisms.

Phase 2: Transition (months 5-12)

Execution was meticulous:

Management team. We hired a managing director with experience in the sector and in middle-market companies. The founder’s son assumed the role of operations director, reporting to the managing director. The founder maintained a consultancy role for 12 months, facilitating the transition with the most important clients and suppliers.

Immediate investments. Renewal of two obsolete production lines (EUR 800,000 investment), implementation of an ERP to replace the Excel spreadsheets that had been running the company, and hiring of a financial controller.

Operational adjustments. Closure of the loss-making product line (freeing production capacity and working capital), renegotiation of raw material supplier contracts, and revision of the commercial policy (4% price increases with clients where the company had negotiating power).

Phase 3: Consolidation (months 13-24)

The second year focused on consolidating the improvements and laying the foundations for growth:

Commercial growth. With the production capacity freed by closing the loss-making line and the machinery upgrades, the company was able to accept orders it had previously turned down. Revenue grew 11% in the second year.

Corporate governance. Board of directors with monthly meetings, monthly reporting system, three-year strategic plan, professionalised remuneration policy.

Team development. Sales team training, recruitment of a commercial director, development programme for middle managers.

Results

Twelve months after the deal closed:

Metric	Before	After (12 months)	After (24 months)
Revenue	EUR 12.0M	EUR 12.4M	EUR 13.8M
EBITDA	EUR 1.1M (9.2%)	EUR 1.6M (12.9%)	EUR 2.1M (15.2%)
Headcount	85	82	89
Annual investment	EUR 120K	EUR 900K	EUR 450K
Net financial debt	EUR 2.8M	EUR 3.4M	EUR 2.9M

The founder received a combination of price for his shares and a transition consultancy that allowed him to retire with peace of mind. His son went from being an employee without a formal title to a recognised executive and co-owner of a more professionalised company. And the 85 employees — now 89 — kept their jobs in a company with a better future.

Lessons

Succession is not an event; it is a process. It is not resolved in a signing at the notary’s office. It requires months of planning, design, and execution. Hasty transitions generate problems that take years to resolve.

Separating ownership and management is key. The founder’s son was an excellent operations director but was not prepared to be managing director. Recognising this — without it being a failure — and designing a structure where each person contributed their best was the success factor.

Patient capital is the right partner. A private equity fund with a 3-5 year horizon would not have worked here. The company needed time to transform, and the founder’s son needed a long-term committed partner, not a buyer looking for a quick exit.

The numbers do not lie, but they do not tell the whole story either. The financial results improved significantly, but the real success was that a company with four decades of history found a second life without losing its identity.

If your family business faces a succession challenge, do not wait until the situation is urgent. Planning the transition with time is the best guarantee that the legacy is preserved and that all parties achieve a satisfactory outcome. Let’s talk.