Chapter 41


Shareholder structure explains how power is distributed among a company’s different share-

holders or groups of shareholders. Major shareholder categories are as follows:

  • family shareholders. This model is in decline. New industries require too much capital for a family-owned structure to be viable. Funding requirements make capital markets become increasingly important;

  • business angels who invest at the most risky stage of a company: its creation or shortly afterwards;

  • investment funds (private equity) whether they are venture funds, LBO funds, capital development funds, etc.;

  • institutional shareholders (insurance companies, pension funds, unit trusts, etc.) who are becoming less passive;

  • employee-shareholders. Normally these shareholders are loyal and non-volatile, lending a degree of stability to the capital;

  • governments, the importance of which is rising due to sovereign wealth funds mainly originating from emerging markets.

Defensive measures for maintaining control of a company’s capital carry a cost, because they prevent investors from taking advantage of the potential opportunities a takeover might create.

These measures include:

  • separating management control from financial control through double-voting shares, holding companies, limited share partnerships, investment certificates and non-voting shares;
  • controlling shareholder changes through right of approval clauses or pre-emption rights;
  • strengthening the position of loyal shareholders by carrying out reserved cap- ital increases, buying back shares, merging, encouraging employees to become shareholders and issuing warrants;
  • exploiting legal and regulatory opportunities: specific regulations, voting right limita- tions and poison pills.

The best protection against a change of control is a good operating performance and a high share price which make shareholders happy and loyal.

In recent years, the decline in the number of listed companies and the increase in the number of companies controlled by investment funds has reflected the increased competitive advantage of these funds due to their intrinsic characteristics (governance, profitability, time horizon), while the constraints on listed companies have continued to increase. As a result, below a value of €1bn, listing a company becomes very complicated. Above €10bn, investment funds find it more difficult to gain a footing for the moment.