FAMILY FORTUNES

Take a tour of the Benelux area of Europe visiting a few major players in the crane industry, and one thing is striking: the preponderance of family-owned businesses.

One can think of Van Seumeren in the Netherlands, or Arcomet and Sarens in Belgium, to name just three. All are not only family-owned, but also family-managed.

There are well-established benefits and disbenefits of companies being dominated by families. On the one hand, motivation is not solely reliant on money and short-term gain, and it is easier to plan long-term when you have a picture in your head of the grandchild who will one day inherit, rather than a picture of an impatient shareholder breathing fire. Working with family members can doubtless be rewarding for close families who, with hectic business schedules and full lives, might otherwise not see much of each other. A solid rooting in family life can only be healthy for a hard-working entrepreneur.

On the other hand, there is always the danger of family feuds, the bitterest and most destructive kind of dispute, or of a wayward spouse or child being allowed to shop, drink or gamble away the family fortune. A more likely pitfall is that business decisions may not always be rational, based instead on ego, vanity and the greater glory of the family name. Further, the emotional burdens of running the family firm can be greater than any physical and financial ones imposed by third-party owners.

Happily, none of the above mentioned companies appear to be run by would-be JR Ewings, the Dallas oil tycoon with a neurosis about living up to his father.

Perhaps the biggest practical impediment for family firms is that faced by any company in fully private ownership. All spending must be financed either by revenue or borrowing, without recourse to equity funding. Having inherited daddy’s or grandpa’s company, the emotional pressure not to sell some or all of it must be huge, however logical such a move would be to raise funds for expansion and development.

Van Seumeren, however, has shown every sign of being able to make major investments unimpeded by lack of equity injection. The firm, established in 1966, is owned by the four children of the founder Jan van Seumeren. Jan is retired now but still regularly shows his face around the office. Each of his children, sons Frans, Jan, and Roderik and daughter Henneke, has a 25% share, but it is Frans who is the company president. Third generation Van Seumerens are also working in the company.

The past couple of years has seen the company invest significant sums in increasing its heavy lifting capability with $40m being spent in 1996, quite a sum for a company whose turnover that year was $100m.

In 1996 it bought a huge 1600t-capacity Demag CC12600, the world's biggest single-body crawler crane, developed its Twin Ring concept (manufactured by Huisman-Itrec) which involves a ring base attachment for any of its five Demag CC4800 crawlers to raise their capacity, and produced the Rambiz barge crane.

To follow this, in 1997 Van Seumeren came out with the Platform Twin Ring HD, a development from the Twin Ring where the crane is fixed to the ring base.

The CC12600, jointly owned with Pirson Montage, began its first project at a power station in Lippendorf, Germany, in January last year. It completed work there shortly before the end of the year and is now on the banks of the Clyde in Scotland working for UIE where it will be kept busy until the middle of this year.

The Twin Ring attachment, first used in September 1996, is now in the Middle East having finished work in the Netherlands at the Exxon Chemical site at Europoort. The beauty of the Twin Ring system is that the ring attachment can be dismantled from one CC4800, (leaving the crane free to continue work in stand-alone mode) and shipped over to another CC4800 without transporting the fully configured equipment, explains Patrick Freericks, assistant director for international affairs and son of Henneke van Seumeren, who herself manages the company's public relations.

Van Seumeren is the only company in the world to have so many CC4800s, having acquired its fifth just at the end of last year, and – with the original Twin Ring, the Platform Ring and the CC12600 – lays claim to ownership of the three biggest cranes in the world.

The Platform Ring crane is also moving on to a new job, having finished at Boxberg in Germany. It is due to start work soon at a Reliance petro-chemical plat in Gujurat, India (not the Twin Ring, as stated in CT Oct 97).

Further investment has been made by Van Seumeren this year in a new yard in Rotterdam, conveniently right next door to Huisman-Itrec, with whom Van Seumeren does so much of its crane development work. There at the moment is the Rambiz crane – two 2,000t cranes cobbled together and put on a barge to make a massive lifting beast with a low draught. Jointly-owned with Scaldis, it was specially designed for working on the Vasco da Gama Bridge in Lisbon, Portugal. Freericks says that the Rambiz is in the Rotterdam yard “getting modifications”. What modifications are being made is not clear, as its has not yet got another job to go to, and some in the industry question whether there is another appropriate application for the Rambiz in its current configuration on the horizon. “Modifications” may need to be quite significant, though the company claims that a contract is imminent.

In spite of the Rambiz’s current inactivity, Van Seumeren remains consistently busy, with 60% of its workload outside of the Holland and Belgium, and much of it from petro-chemical works in the Middle East. The company certainly challenges the notion that lack of equity funding is a barrier to capital investment.

One of Van Seumeren’s strongest competitors in the crane rental and contract lifting business is NV Sarens-de Coster of Wolvertem, Belgium. The company, which started in transportation and forestry, was founded in 1955 by Frans Sarens, a farmer with 12 children. Eight of the children worked in the company, though all are now retired. Today the company is headed by grandson Ludo Sarens. Ludo’s brother Hendrik is Director Cranes & Transport, and his brother Benny is Director Load Out/Special Operations and five other of Frans’s grandchildren also work in the company today, together with two great-grandchildren – 10 family members in total and all bearing the Sarens name. The company remains 100% family-owned and achieved a turnover of $58m, a figure up 27% on 1994’s $42m.

Sarens too made a significant investment in 1997, buying the Contracts Europe business (the heavy lifting division) of GWS in the UK to form Sarens Sparrow. With it came four strut boom cranes, including a Demag PC9600, and about 20 employees. Hendrik Sarens describes the GWS division as nicely complimentary. “It was important for us to increase our lifting capacity,” he says. GWS had no crawlers, Sarens had no mobiles as big as the PC9600. Previously its biggest was the 800t strut boom TC3000.

Sarens also bought five Manitowoc cranes last year: three M888s and two M777s. It did not have any Manitowoc cranes before because earlier models had no luffer. “But this new generation can be used in our typical market with a main boom and a luffing strut boom,” he says.

The Sarens fleet is mostly Liebherr in hydraulic cranes, plus some PPM, Krupp, Tadano Faun and Kato. The strut boom cranes are mostly Demags.

Hendrik Sarens describes the domestic market for hydraulic cranes as “low profile for the past couple of years”. Competition is stiff and there is over-capacity. Sarens’s strut boom cranes are almost all abroad. The company is particularly active in the offshore market with its hydraulic trailers.

The company has been active in France and though it worked on a host of refineries, nuclear power stations and waste-to-energy plants there during 1997, the prestige project was probably the new Grand Stade sports stadium in Paris which will host the soccer World Cup Finals this year. Sarens Sparrow lifting the stadium roof sections looked like it was going to be Belgium’s only participation in the event, until the national side scraped through the play-offs at the expense of the Republic of Ireland last November.

For the near future we can expect to see Sarens buying Liebherr’s new 500t LTM1500 which “looks attractive”, Hendrik Sarens says, and Demag’s telescopic boom AC2000, which was first announced as a 600t crane but looks like having a capacity of 700t once its comes off the production line.

From the E313/A13 motorway near Paal is clear evidence of a major capital investment made by another Belgian family firm.

Arcomet, owned by twin brothers Leo and Dirk Theyskens, has a splendid new office block, opened last April, that is outwardly like any other out-of-town industrial estate tin shed, except for the flourish of two tower crane sections on either side, supporting a lattice cross beam with the name of the company in large letters. Inside, all is light, the decor modern, and the look high-tech. Off the central area are glass-walled meeting rooms, with offices above. A new crane yard, or logistics centre, is at another site, but just 500m down the road. Together they represent an investment of about BEF100m ($2.7m), a sure sign of the Theyssen twins’ confidence in the future of Arcomet.

Arcomet was founded in the 1950s by Leo and Dirk’s father as a tower crane manufacturer, but unusually for a manufacturer it began renting out tower cranes in the early 1990s and this has now become the largest part of the business. The twins used to share ownership with three other brothers, but the others sold out to them. The eldest brother, Luke, remains in the company as technical director.

Arcomet has 500 tower cranes in Holland, Belgium and (increasingly) Germany, rented direct to contractors, though none in France, where it judges the Potain stranglehold impregnable. The rental division includes Liebherr and Wolff tower cranes.

Arcomet claims sales of something in the region of 100 new tower cranes a year and 200 second-hand.

Arcomet is also the exclusive dealer of Tadano mobile cranes in Belgium and Luxembourg and plans to make this business, which accounts for about 15% of turnover, into a separate division. To this end, Rudi Vanderhulst was brought in last year as sales manager.

In 1996 Arcomet sold just seven or eight new mobile cranes, he says. In 1997 it reached about one new crane a month, in addition to the second-hand cranes sold. With the total Belgian market estimated at only about 38 new machines a year, Vanderhulst says, Arcomet’s Tadanos have roughly a 30% market share. This year he hopes to increase sales to about 15 or 16.

About a third of these sales are Faun all-terrain cranes and two thirds are the Japanese-made Tadano 25t and 30t rough-terrain models.

“We are asking Tadano in Japan to put a 40t or 50t RT back on the European market,” Vanderhulst says. But given that 80% of Tadano’s production is sold in Japan, it may be hard to justify the cost of adapting more RTs for the relatively limited European market. European dealers remain keen, though. Until then, there is Faun’s 180t AT soon to be launched which Arcomet hopes to have available for sale next year.

Arcomet would not start renting mobile cranes as well as towers, Vanderhulst says, because this would bring it into competition with its main customers, rental companies such as Neko, Dadak, Laroy (part of the Sarens group) and Francks.

Fortunately for Arcomet, Belgian construction contractors go against the general trend and still like to own their own plant rather than rely on the rental sector, so there is a market for selling direct to the contractors, says Vanderhulst.

Hovago, based near Rotterdam in the Netherlands, is another privately-owned company showing no signs of needing to sell equity. It is perhaps not strictly fair to describe Hovago as a family firm, but there is lineage. It is 100% owned by Doron Livnat, the son-in-law of the founder Peter Baris.

The company began life in 1946 buying military cranes from the Allied forces after the end of the Second World War, reconditioning them, and selling them on for civilian use. Hovago remains in the business of buying used cranes, reconditioning them, and selling them on, and Livnat knows of no one in the world who has been in this business longer.

His main competition is probably the second-hand divisions of those manufacturers like Liebherr who buy back, recondition and re-sell their own used cranes. It could be said , though, that Hovago differs in that this is its core business, while Liebherr’s activity in this market perhaps has more to do with a wider strategy of market control.

Livnat joined the company in 1984 and took over ownership in 1987. One of the first moves he made, after adopting the Hovago name for the company, was to get into the rental business. Livnat’s strategy is always to have cranes available, no notice necessary, for either sale or rent. He will not rent to end-users. “I can’t compete with the rental companies unless it’s a lifting contract, then that’s another story,” he says. The contract business accounts for about 10% of his rental business but he is keen to develop it further.

Hovago’s rental market is the rental companies themselves, supplying them with cranes when their order books outstretch their fleet.

Hovago is a world-wide business, with depots in Singapore, Hong Kong, Germany and Houston, Texas. Only 5% of the business is in the Netherlands. Key markets are South East Asia, North America and South America. “We are fully international,” Livnat says. “The Dutch people are known for their Flying Dutchman mentality.” Livnat himself is Israeli but says he has been in the Netherlands long enough for such characteristics to have rubbed off on him. He believes few other companies would take the risk, as he did, of committing a team to a three-year harbour building contract in the Dominican Republic.

Today Hovago has close to 250 cranes in stock for sale or rent. In 1997 Livnat bought about 200 cranes and sold about the same number. For renting he buys new as well as second-hand machines. Last year he bought two big Demag crawlers - a 300t CC1400 and a 500t CC2600 Superlift - as well as an 800t Demag TC4000 truck crane. The crawlers have both seen good action, one on a lifting contract in Morroco, the other in Indonesia.

If the fortunes of the Sarens family, the Van Seumerens and the Theyskens are anything to go by, and the firm Doron Livnat took over from his father-in-law, then there does not appear to be too much wrong with the family business as an institution.

Of course, being privately-owned they are not obliged to reveal the same depth of financial information that publicly-owned companies must. It is harder to judge the fiscal prudence of the various managements or learn how they are coping with the bank borrowings which must surely be helping to fund the impressive investments that have been made and, one hopes, will continue to be made.

But we can say for sure that the “Mom and Pop Store” label that is sometimes applied to family firms is hardly accurate here, for all four are major companies in a capital intensive industry and in the past year alone have invested heavily in developing their businesses further for future generations.

The twist, of course, is that the greater the success of the present generation, so the greater the legacy, and the greater the responsibility that they pass on to the next generation.