In 1998, Wall Street corporate raider Asher B. Edelman tried but failed to break up the hotel and champagne business controlled by France's Taittinger family. Seven years later, the Taittinger business is finally being broken up, but this time Edelman has nothing to do with it.
Last month, the Taittingers agreed to sell their two companies to Starwood Capital Group LLC, ending their ownership of the business their ancestors founded about 70 years ago. Starwood, U.S. hotel mogul Barry Sternlicht's private investment firm, plans to keep only the hotels and will resell the champagne business, possibly back to a branch of the family.
The Taittinger sale illustrates the challenges family business dynasties face in trying to hold on to their companies. Just last week, family-controlled media giant News Corp. was rocked by the resignation of Lachlan Murdoch, the oldest son and heir apparent of Chairman Rupert Murdoch, apparently prompted in part by an inheritance battle.
Conflicts between heirs are one of the perennial obstacles facing founding families as businesses grow. But in Europe in particular, many other factors have emerged in recent years that make preserving family control even more difficult.
Global competition and the advent of the euro, which has fostered a unified European market, have put pressure on family businesses to gain scale.
To raise capital on financial markets, some European families have had to dilute their ownership stakes and accept the scrutiny of public investors. Others have chosen or been forced to sell.
In the case of the Taittingers, the sale was precipitated by the pending expiration of a shareholder pact binding the family to Belgian tycoon Albert Frere. But France's wealth tax and diverging interests among different factions of the family also played a role.
Dynasty preservation is less of an issue in the United States, where companies tend to go public and turn management over to professional executives sooner.
The more dynamic U.S. entrepreneurial culture also means older, dynastic companies account for a smaller portion of the economy.
But in Europe, where entrepreneurship is riskier and economic policies are less market-friendly, the corporate landscape is still dotted with family-controlled companies that go back decades, sometimes more than a century.
A comparison of the stocks that make up the Dow Jones industrial average and the Paris stock exchange's CAC 40 index shows that one in four of France's big blue-chip companies are controlled by families, compared with one in 10 in the United States. Among the big French companies still controlled by their founding families: tiremaker Michelin SA, automaker PSA Peugeot-Citroen and cosmetics maker L'Oreal SA. By contrast, the few U.S. companies in the Dow industrials that are controlled by a family or a founder, such as Microsoft Corp., are relatively young and haven't been subject to the test of time and succession.
Like the Taittinger group, other European businesses are finding it increasingly difficult to keep the family tradition alive. Lazard patriarch Michel David-Weill sold his shares and handed control of the investment bank over to Wall Street dealmaker Bruce Wasserstein earlier this year after failing to find a family successor, his three daughters having shown no interest in the business.
Last month, France's political establishment rallied behind Danone SA chief executive Franck Riboud, the son of Danone founder Antoine Riboud, amid rumors that PepsiCo Inc. was preparing a hostile takeover bid for the French food-and-drinks company. Riboud owns less than 0.1 percent of Danone and in recent years in an effort to woo international investors, he eliminated most of the poison pills that used to protect Danone from a takeover. As a result, Riboud's control over the maker of Evian water is tenuous.
The European Union's deepening economic integration and the creation of the euro six years ago have created a more competitive and capital-intensive environment for Europe's family businesses. The emergence of new economic powerhouses such as China has changed the priorities of governments.
For all the vocal support it extended to Riboud, the French government has created a less-favorable environment for family capitalism in recent years by promoting "national champions," French companies big enough to compete with U.S. and Asian giants, some say.
"What has profoundly changed in France is that for a long time the politics and economy favored families," said Pierre-Christian Taittinger, one of late company founder Pierre Taittinger's eight children. These days, the government "wants big groups. It's no longer about individual success."
To be sure, there are still plenty of dynasties that have succeeded in retaining control over their businesses in Europe. Germany's Quandt family controls luxury automaker BMW AG with a 46.6 percent stake. The Michelin family has controlled the famous tiremaker for 140 years through a limited-partnership structure, even though a majority of the company's shares have long traded on the Paris stock market. France's Ricard family still controls Pernod Ricard SA, even though it owns less than 12 percent of the spirits-and-wine group.
"It's been my experience that when there's a strong will on behalf of the owning family to stay together and continue, they almost always can find a way to do it," said John L. Ward, a professor of family business at IMD business school in Lausanne, Switzerland.
In the past decade, some European countries have increased tax exemptions for family businesses to alleviate the financial strain on entrepreneurial families. Spain, for instance, offers a 95 percent reduction on inheritance tax for family-owned firms that meet certain criteria. U.S. tax rates, which tend to be lower than in Europe, make it less onerous for American founding families to keep large stakes in their businesses.
Starwood is expected to choose an acquirer for the Taittinger champagne business this week. Pierre-Christian Taittinger, who was one of the champagne company's top executives before the sale to Starwood, thinks some younger family members will use the opportunity to get back into the business.
"If I can help them, I will do it," he said. "But it's up to them now to create," he added, challenging the new generation of Taittingers to "prove their talent and spirit of competition."