Taking the family out of business at De Beers
How many generations do family businesses last? Any idea? No, nor me, but my guess is that a small minority make it to the third generation and a tiny minority to the fourth.
Last Friday’s thunderbolt news in the diamond business is that the Oppenheimer family have decided to sell their 40% stake in De Beers to Anglo American for a tidy $5.1 billion.
We’ll come back to that, but first a bit of history. De Beers was founded in 1888 but in the 1920s Ernest Oppenheimer took control of the diamond company and the Oppenheimer dynasty was established, with control passing to Ernest’s son Harry and later to the next generation, Nicky Oppenheimer, current Chairman of De Beers Group.
So, the Oppenheimers have clocked up three generations, with the fourth – Nicky’s son Jonathan – waiting in the wings.
But it’s not to be for Jonathan. After an 85-year dynastic reign, the Oppenheimer family are cashing out, handing control to Anglo American, a company founded by Ernest Oppenheimer a century ago before he acquired control of De Beers.
It’s one of those things which has come as a bit of a shock but perhaps not a complete surprise. Nicky is 65 and must be thinking about retirement – if not now then at least within a handful of years.
Is it really credible that in the second decade of the 21st Century a company like De Beers would be passed on to the fourth generation like a family portrait?
Can you imagine Anglo American (or its shareholders) standing by and watching any of its other business units being passed down from grandson to great-grandson? Me neither.
Compared to his father, I never thought that Jonathan was all that enamoured with the diamond business anyway (some might add: nor it with him…), at least not that part of the business which involved selling rough diamonds to De Beers’ clients.
In the last few days I’ve read comments about how it’s a shame that De Beers will no longer be a family company. Well, perhaps. But what advantage does being a family company really confer?
Above all else De Beers is a mining business with huge capital investments, long lead times, major physical operations, legislative and environmental issues… does that sound like a quaint family venture?
Perhaps the other side of De Beers – the other end of the see-saw – the luxury brand with retail and marketing ventures, perhaps that’s more sympathetic to a family structure.
Having a family business can be an asset in that context, but it usually requires a family name and perhaps even a specific individual, something or someone for the market and for consumers to get to know… a bit of personality (think Graff, Harry Winston, Bulgari, Ferrari…).
De Beers had a slight problem here because in its downstream ventures the Oppenheimer name isn’t really a part of the proposition in the same way that it has been for its rough diamond clients.
I did a quick check: I searched for ‘Oppenheimer’ on the De Beers retail site. Here’s the rather telling result:So, the implication would seem to be that taking the Oppenheimer family out of the De Beers business isn’t much of an issue, at least not in its guise as a consumer-facing diamond jewellery business.
What next for the Oppenheimers? Well, they have an extra $5.1 billion to play with and I don’t imagine they’ll just leave it sitting in the bank.
I’ve read speculation that they want to invest in Africa, the continent which has been so good to the family over the last century, but I can’t see them going back into the diamond business in a new guise (and I expect there are non-compete clauses in place with De Beers).
Although, having said that, Jonathan is Chairman of Element6, De Beers’ ambitious industrial diamond business, so he might retain some interest in this area… perhaps synthetics? [Note: that's not a serious or an informed suggestion...]
Jonathan describes himself as an ‘Afro-optimist’, so my guess is that we’ll see investments in exciting growth opportunities across Africa. Perhaps precious metals such as gold and platinum, rare earth metals, tourism, agriculture, infrastructure, telecoms, energy…
And De Beers? Well, I’ve read and heard a lot about this being the end of an era, and so it is. But rather than look backwards, I prefer to think of it as the start of a new era.
For De Beers, I think leaving The Family behind will be liberating.