On Lider’s portal, in the very popular section ‘Companies and Careers’, we published that Stjepan Talan, an exceptional entrepreneur and founder of Solvis, a solar panel manufacturing company, is no longer the CEO (he remains a member). He has been replaced by the well-known manager Josip Lasić. The change is not surprising. Eight months ago, Talan sold sixty percent of his shares to the Slovenian investment fund Advance Capital Partners. So the new majority owner appointed his own man as CEO.
Almost a week goes by without the media reporting that yet another excellent medium-sized company, created by founding entrepreneurs in the nineties, has been sold to new owners. For a decade and a half, we at Lider have been organizing the conference ‘The Future of Family Businesses. And at each one, the estimate has been mentioned that when biology accelerates decisions, a maximum of thirty percent of family businesses will remain in the ownership or control of the founder’s family. We sought answers on how to defend that thirty percent, but, to be honest, we did not think about what will happen to the remaining seventy percent. If the estimate is correct that there are about 17,000 companies in Croatia facing generational transition, the second generation will not inherit around 12,000 companies.
Reaping the Cream
Now we can sense the epilogue of a new phase of transformation of companies in Croatia. Some will shut down or will fail due to delayed decisions when the founder can no longer keep all the strings. Some will be resold among the domestic founders themselves. But the largest part of the best medium-sized companies, those that are just a few steps away from successfully developing everything that has been created over the past twenty to thirty years, will, as it seems now, come under the management of private funds. Mostly headquartered outside Croatia. From unknown owners in the last phase of socialism (social (non)ownership of companies), now come unknown owners (investors) in the final phase of transition.
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Feelings are mixed. On one hand, it is good that there are buyers. It means that the founders have created something valuable and potent. At the same time, however, there is a regret that some anonymous investors in investment funds, if the fund managers to whom they entrusted their money deliver the promised high returns, will reap the cream. Which could have remained here. If the state had been aware of the phase coming and had created a stronger ecosystem, it could have been different. We could have had companies and funds of domestic origin that would defend positions in Croatia, but also conquer in one of the two regions to which we belong (the region of former Yugoslavia and the region of Austro-Hungary).
This way, the excess profits, legally and legitimately, will flow out of Croatia. And many companies that could have been major players in some new systems will become mere components. Often stripped of developmental functions. It can also be expected that in many cases, if the sales climate worsens for fund managers, accounts will dry up, and in a few years, an excessive portion of profits will be extracted. Of course, there will also be cases where, under the direction of fund managers and the staff they appoint, the founders’ mistakes will be corrected.
Who Are the Real Owners?
All in all, it is what it is. In monitoring what will happen on the scene, some new facts need to be taken into account. It is wrong, or at the very least superficial, to say that the new owner of a company sold by the founder is a Slovenian, Polish, Czech, or Austrian fund. The headquarters of some equity fund or venture capital fund may be in the capital of one of those countries. But the fund managers are not the majority owners of those funds. It is enough to scratch the surface a little to see that the investors are scattered all over the world. And if you dig deep enough, you will come across giants like BlackRock, for example. It is also worth noting the quiet mention of ‘private investors’. Some are wealthy families enriched over generations in the West. But there are certainly investors who have come to wealth in dubious ways. So this is a form of legalizing money. When a law firm buys a company for someone, it is immediately suspicious. When the operation is carried out with the help of a fund, everything looks more innocent.
Can something still be done to ensure that the Croatian economy does not disproportionately belong to fund owners? When the government stops dealing with fighting inflation by baking croissants at home, it would be wise to gather the remaining founders and see how to turn from prey into hunters. Ideal are healthy family businesses owned by capable second generations. Or those in which the family retains majority ownership, while funds serve as welcome enhancers of the business model.
