Family Business Succession Spain: Case Study | BMC

Client Background

A third-generation Spanish manufacturing company — a precision components manufacturer founded in the late 1970s — had built its position over five decades as a specialist supplier to the automotive and industrial machinery sectors. With €45 million in revenue and 280 employees, the business was profitable, had a diversified client base, and owned freehold manufacturing facilities that represented significant balance sheet value. By any operational metric, it was a well-run business.

What the company had never managed to build was a governance framework capable of handling the increasing complexity of family ownership across three generations. The original founder had passed ownership to two of his sons on his death in the 1990s. Those sons had in turn brought in their own children as minority shareholders and, in some cases, managers. A shareholders’ agreement dating from 1998 — drafted for a two-brother ownership structure — did not contemplate the governance requirements of an eight-shareholder, two-branch family with divergent views on virtually every strategic issue.

The Challenge

The two family branches held incompatible strategic visions across the three most consequential decisions facing the company. On internationalisation, one branch wanted to invest in a German sales subsidiary to capture automotive OEM contracts; the other wanted to protect cash distributions and avoid the working capital requirements of international expansion. On dividend policy, the same split manifested as a recurring conflict at every AGM. On management, both branches had candidates from the next generation they wanted to see in senior positions, and neither was prepared to defer to the other’s preferences.

The absence of a family protocol or a board of directors with clear rules had turned every significant decision into a potential conflict. The CEO — himself a family member from one of the branches — lacked a clear mandate and sufficient institutional backing to execute any strategy. He spent a disproportionate amount of his time managing family politics rather than running the business.

The second generation, approaching retirement age, wanted to secure the company’s continuity before stepping aside. But they could not step aside without a succession structure in place, and they could not agree on a succession structure without first resolving the governance deadlock. The situation had been static for three years when the family contacted BMC.

Our Approach

The project was structured in four phases, each building on the previous one in a sequence designed to build trust incrementally before confronting the most difficult issues.

The first phase was a deep diagnostic: individual interviews with all eight shareholders from both family branches, conducted separately and under confidentiality, to understand each party’s actual interests beneath their stated positions. We also analysed the existing shareholders’ agreement, conducted a financial and strategic review of the company, and assessed the capabilities and ambitions of the third-generation candidates for management roles. The diagnostic produced a clear picture of where genuine common ground existed and where the differences were structural rather than personal.

In the second phase, we facilitated a family mediation process with all parties. The objective was not to impose solutions but to build consensus on the principles that should govern the business going forward. We ran four sessions over two months, each focused on a different governance domain: management access and evaluation, dividend policy and capital allocation, exit mechanisms for shareholders, and strategic decision-making processes. The result was a family protocol that regulated each of these areas in language that both branches contributed to and accepted.

The third phase was the implementation of the new governance model: constituting a Board of Directors with three senior independent members with backgrounds in precision manufacturing, private equity, and international market development, and redesigning the management structure with clearly defined responsibilities and authority limits. The independent directors were selected through a process that both family branches participated in and agreed on — a deliberate design choice to give the board legitimacy from the outset.

The fourth phase covered the next-generation development programme: leadership training, executive mentoring paired with each of the three third-generation candidates in management roles, and a twelve-month plan for progressive incorporation into operational and strategic responsibilities with defined milestones and evaluation criteria.

Results

The generational transition was completed in eighteen months without operational disruptions, loss of key clients, or deterioration of the key account relationships that the outgoing second-generation managers had built over decades. The three independent directors brought an external perspective that professionalised decision-making and, critically, provided the institutional backing the CEO had lacked to execute strategic initiatives.

The first act of the new board was to approve the European expansion plan that had been blocked by family conflict for three years. That decision, made within six weeks of the board’s constitution, unlocked a €3M investment in a German sales subsidiary that contributed to the 12% revenue growth recorded during the transition period.

The family protocol was signed by all eight shareholders without exception, and the second generation was able to retire with confidence that their legacy was in capable hands with rules clear enough to prevent the governance vacuum that had characterised their own tenure from recurring in the third generation.

Key Takeaways

Succession in family businesses fails most often not because the next generation is unprepared, but because the governance framework is not built before the transition begins. The process of designing a family protocol forces the conversations that family members have been avoiding for years — about money, about merit, about the relationship between family membership and professional role. Those conversations are painful, but they are far less painful than having them in a boardroom crisis or a court dispute after the transition has already gone wrong.