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How family conflict is driving Grupo Eulen to an IPO

Serious conflict between the founder of one of Spain's largest private, family-owned companies and his children has caused such instability that it stands on the brink of a listing, writes Rodrigo Amaral.

Grupo Eulen, a services group which operates in a variety of sectors such as cleaning, security, telemarketing, logistics and human resources, is led by founder and executive chairman David Álvarez.

Alvarez transformed the small cleaning company he founded almost five decades ago in Bilbao into a multinational services group that has an annual turnover of €1.3 billion. But the usually discreet firm is attracting attention from the Spanish media for the drama that is developing within the founding family.

The smoking gun for the present upheaval dates back to January when five of Alvarez's children managed to sideline their father from the management of El Enebro, a holding company that controls a number of businesses in the food and drinks sector, including the world-famous winery Bodegas Vega Sicilia.

In the mid-1980s, Alvarez decided to share El Enebro's capital between his sons, giving a 14.25% share to each of them, on the condition that he would remain as chairman. However, in January, the five rebels voted to dismiss their father as chairman. In response, he has pledged to take the case to the courts.

According to reports, Alvarez has since plotted to brush aside the rebels, led by second-generation CEO Juan Carlos Álvarez Mezquiriz, who were pressing for him to leave the day-to-day management of the group entirely.

Each of his children own a 7% stake in Grupo Eulen, which means that although they are minority shareholders individually, as a group they have more votes in the nine-strong board than their father who has the support of one son, a daughter and an independent board member.

The first steps towards an IPO were taken in February during an extraordinary general meeting of the board. Alvarez, who owns 51% of Grupo Eulen's capital, spectacularly dissolved the board in which all his seven sons and daughters were members. The move has been interpreted as a dramatic tour de force to reassert his authority by sidelining his five rebellious children.

As a result of the EGM, Alvarez and one of his daughters were appointed as joint administrators of the company, an article that prevented the company from going public was scrapped and it was agreed that new independent counsellors would be chosen.

Alvarez now plans to list the firm at the Mercado Alternativo Bursátil, Madrid's alternative stock exchange.

In a rare interview to newspaper Expansion, Alvarez said that he has taken absolute control of Grupo Eulen as a temporarily measure while the company prepares itself for the IPO. The public listing, he claimed, is aimed at raising funds for the further expansion of Grupo Eulen's international businesses. His children, he said, were against his plans to professionalise the top management of the group, and therefore the coup de gras was inevitable.

 

The family battles are exacerbated by the fact that 83-year-old Alvarez has just married for the third time. His new wife is 28 years younger than him, and it has been reported that the sons did not approve of the marriage.

In the end, Alvarez claims his goal is to maintain the integrity of the company. "Grupo Eulen will go public in order to avoid that family divisions result in the breaking up of the company," he told the newspaper. "My goal is to stabilise the company so that it doesn't find itself at the hands of a fratricide fight when I die."

Without a clear succession plan outlining when Alvarez would step down, the family has found it impossible to successfully negotiate transfer of ownership from one generation to the next. This, coupled with the internal family politics, meant Alvarez saw an IPO as his only option.

However, if the IPO results in a professionalisation of the board and the family remain involved in the business, the company can continue to succeed with stronger governance that includes the family. 

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