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All for one: the Mulliez dynasty's secret pact


Bertrand Gobin is the author of Le Secret des Mulliez.

The Mulliez family, which controls a distribution network empire throughout Europe, is one of the wealthiest families in France. And, as Bertrand Gobin reports, this wealth is mainly thanks to a special family pact…

The story of the Mulliez family, which in the space of 50 years has become the foremost family power in the French economy, is an amazing one. The 500 "associate" family members control an empire that boasts a wide range of brands including Auchan, Décathlon, Leroy-Merlin, Boulanger, Saint-Maclou, Kiabi, Pimkie and Flunch. They are omnipresent in retail, with activities in most areas, such as hypermarkets, DIY, sports, clothing, auto-centres, electrical appliances, restaurants, and rugs and carpets. In total they run more than 7,000 stores in 30 countries and more than two million people browse through their aisles every day. Although there are no official figures, the empire is believed to employ 300,000 staff. In 2006 global sales stood at more than €56 billion. Factoring in enterprise value and real estate (the family owns most of their shops), the family is estimated to be worth approximately €30 billion.

It is naturally in France, where they have weaved an extraordinarily dense commercial web, that the economic weight of the Mulliez is the most visible. There, cumulated market share of all the family's brands represent 10% of households' budget for daily spending and capital goods – there are very few French citizens who can say that they have never set foot in one of their shops. Internationally, the Mulliez empire is most developed in Spain, Italy and Poland. The brands are barely present in the US, the family preferring to concentrate on countries that experience strong growth and have an emerging middle class that wants to spend its money. This explains current expansion in Russia – where they have had businesses in Moscow since 2002 – China and Brazil.

The secret pact
The Mulliez story is atypical and begins in Roubaix, a town to the northeast of Lille in northeast France. Unlike other families in the region – who made their fortune in the textile business but who now are only to be found in street names and history books – the Mulliez have succeeded in remaining at the centre-stage of the economic scene. Most of all, thanks to their extremely ingenious family pact, they have managed to keep their independence and stay away from the vagaries of the stock markets, which given their level of turnover is highly impressive.

"I don't know how you do it," Thierry Peugeot once said to a member of the Mulliez family. "I always have the feeling that I spend my life buying my brothers' and sisters' shares." To keep enough familial control, the shareholder in power often has no other option but to buy shares from those who wish to pull out. In the case of the Mulliez, however, the family has remained exceptionally united. This is an incredible feat, especially considering the exponential growth in the number of heirs over the past 50 years.

"Why would they put their money elsewhere when they can put in their own companies," a Parisian banker jokes. "It's not in their nature. Even when stock markets were at their highest, such as during the dotcom bubble, only a few left the family sphere."

Since 1995, the pact locks in family ownership and manages the expansion of most of the companies owned by the family. This pact is based on two fundamental principles: blood ties and the collective management of the family assets.

Familial exclusivity: only the descendents of the Mulliez-Lestienne branch of the family can hold shares in the holdings that control the companies. This avoids the scattering of capital but, to satisfy possible demands for associate members who would like to reinforce or weaken their holding, an internal market of family shares has been put in place.

Stock communism: the associate members own portfolios, the composition of which is strictly identical and established by the central family council. This is summed up in a motto that roughly translates as "All of us into everything, in the same proportions and in all of the companies".

In practical terms, after the death of their father in 1952, the sons of Louis Mulliez-Lestienne had the choice between sharing the small companies that they owned or staying united. They chose the latter solution. Instead of sharing the businesses, they devised a system to remain united and guarantee a sense of collectiveness in the ownership of their companies. This led to the creation of a "communal pot" of assets to which everyone brought what he or she had developed.

But unlike other family pacts, the Mulliez added a supplementary condition – each company would remain autonomous. In other words, it is possible to have the same shareholders but the capital of each company has to remain independent. "This would have meant bringing together the risks, which we were highly suspicious of," one of the elders says.

If one of the companies suffers losses, the pact ensures healthier parts of the business are not "contaminated". This way, each company draws up its own balance sheet and estimates its own risks, avoiding the need to consolidate the disparate capital. Consequently, the family appears to be a group of owners who hold shares in the same companies as opposed to family that own a group of individual companies.

Looking for proof of consolidated profits in the financial press is a pointless exercise. Each company implements its own strategy, and shareholders cannot impose any constraints. At a time when we talk about economies of scale and critical mass, the principle of non-consolidation advocated by the Mulliez is somewhat surprising. For example, supermarket Auchan and sports retailer Décathlon buy their own bikes; while Pimkie and Kiabi separately outsource the production of their clothing collections. Yet, considering the volumes concerned, there is an obvious loss of earnings. "It is precisely because our companies are free that they are efficient," sums up one family member. If two companies decide that they want to work together in one specific area they can do so, but the decision must be made by the individual company directors and never via a directive from the owners. Each company must set out the best conditions for its development – a spirit of individuality that has never failed.

More than 50 years after this pact was signed it is still formidably efficient, and one wonders why the Mulliez formula hasn't been more widely copied. "No one else has succeeded in reproducing this type of agreement because it is simply impossible on a theoretical level," Thierry Mulliez, the current president of the family association, believes. "There must be a strong desire for equity in order for it to work. It is not always easy to share, even less so to share everything. I would like to emphasise that it wasn't the parents who decided to implement the pact, it was the children. This is probably why it worked – they have chosen this solution, rather than having been subjected to it."

Based on strong principles (eg, familial solidarity and a sense of sharing), the pact also reflects a very strict education, which goes hand in hand with very traditional values: being careful with money, favouring long-term estate planning, a liking for hard work, and encouraging initiative. Religious values are also very present – some articles in the family "rulebook" clearly refer to Pope John XXIII's letter from 1961, for example. The will to develop employee shareholding within the companies is partly to encourage individual property.

Employees hold 15% of Auchan capital. Recently, Arnaud Mulliez, president of Auchan France, met with Nicolas Sarkozy. The French president is trying to encourage measures that allow employees to become shareholders in the companies they work for. One of the aims is to encourage stable, long-term shareholding, which can be seen as a form of "patriotic economy" – this is particularly important in a country where people don't like big French companies being taken over by a foreign group.

Another interesting point in the Mulliez governance system is the absence of places reserved for family members within the companies. "The important thing is not to guarantee a position to every associate member, but to nominate the best people for the job," explains one family member. Therefore, by definition, not all associate members work in the companies. However, the family has implemented ambitious training programmes aimed at those who want to understand how the company works.

Famously discreet
Although it is difficult, when arriving in an average French town, not to notice the stores and multicoloured warehouses of the family's business empire, the Mulliez themselves know how to go unnoticed. They blend into the background, lead mundane lives and the phone numbers of most of the family members are still in the phonebook. "They cannot be called big-time gamblers," acknowledges a city official from Croix, a borough in the posh suburbs of Lille where several of the clan members live. "They don't feel like they need to reaffirm their status by pretending to be cultured."

While they are very discreet, the Mulliez are never at a loss for words. Whether it's to complain against French taxes, such as the wealth tax, or moan about the 35-hour working week, they are best when gibing at initiatives that encourage tax evasion or restrict an enterprising mind. In private, some family heavyweights speak their minds, unlike most big businessmen; however, they are pretty poor lobbyists in the main. The only subject about which they really know their stuff is commercial planning commissions, where authorisations for new store openings are negotiated. They are not in their element in the high society and have never succeeded in making their voice heard.

It's a different story during their private meetings, however, where family affairs can suddenly reappear in between business issues. "It is true that we are strong-minded," one family elder admits. "We don't cut any slack. Our debates are sometimes stormy but what unites us always wins over what could divide us." In other words, the interests of the Mulliez empire.

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