Accounts of merger negotiations between two major beer and beverage companies in Japan reveal a fascinating story about how a smaller, family-controlled company, Suntory, is maneuvering to maintain family business succession in a combination with the much larger Kirin, which is part of the huge Mitsubishi Group. The issue is how much power the founding families of Suntory will have in running the combined company. The story is instructive about how to continue family dominance in a business.

The Daily Yomiuri explains the scenario here.

A family business sometimes offers unique social and other benefits and it will be interesting to see how the negotiations play out. Suntory is using its famous museums and cultural activities as part of its arguments for a stronger role for the family in the combined group. Suntory also has a stronger financial position and better corporate image than that of Kirin. College graduates continually list Suntory among the companies they most wish to join.

On a total asset basis, Kirin is more than twice as large as Suntory, but Suntory is demanding a share ratio in which its founding families, who own about 90 percent of its shares, would have more than one-third of the new company’s shares. Of course, they will become by far the largest shareholders of the combined company, but they want enough shares to secure veto power over important decisions.

In my view, based on my own experience with similar negotiations, they will get it. The families are conducting their negotiations with aggression and confidence and that is often determinative. If the tie-up goes forward, I expect that they will continue to play a major role in running the combined business.