Putting On Heirs

CHRIS SISARICH/IDC FOR TIME
Ernesto Bertarelli, 37, leads Serono, the Geneva-based drug company once run by his late father Fabio

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Barilla
BARILLA GROUP

Soon after selling their century-old pasta firm in the 1970s, the Barillas of PARMA, ITALY, bought it back and have expanded ever since. An Iowa plant is helping Barilla grab 17% of U.S. pasta sales

Annual Sales: $2.4 billion

The Barilla family whose pasta and bread company, based in Parma, Italy, dates back to 1877--hit a big snag in the early 1970s, when the third generation of family managers brothers Pietro and Giovanni quarreled and sold the business to W.R. Grace of the U.S. In 1979, however, Pietro bought back a majority stake, this time on his own, and started the company on a rapid expansion course. By 1993, when he died, Barilla produced 35% of the pasta sold in Italy. Now his three sons Guido, Luca and Paolo and their sister Emanuela are pushing aggressively into international markets, especially in the U.S., where Guido, 44, attended Boston College.

Barilla built a plant in Ames, Iowa, in 1999 and has grabbed about 17% of the $1 billion U.S. pasta market. The company remains private, but whereas their father was reluctant to bring in outside capital, Guido and his brothers are more open to external finance. Last year, in its biggest transaction to date, Barilla acquired Kamps, a big German bread chain, for $1 billion bringing in a bank to finance the deal. Randel Carlock, a professor at Insead, says the family "could have just sat in Parma and made pasta. But the younger generation saw the strategic opportunity."

Bertarelli
SERONO

The family's journey from Rome in 1906 to GENEVA in the 1970s mirrors its shift from traditional drugmaking to biotech. Three generations of successions make it a most unusual biotech firm

Family's Stake: $4.4 billion

Ernesto Bertarelli's father groomed him from an early age to take over the family pharmaceutical business. "As a child, I remember him sitting me down at his desk and telling me, 'One day you'll have to sit in my chair. You'll have to take the decisions.' That makes a big impression on a child," recalls Ernesto, 37. The family firm, Serono, has a long and odd history: it was founded in Rome in 1906, and its best-selling product was long a fertility drug derived from the urine of postmenopausal women, including Italian nuns. Bertarelli's grandfather took it over after the war, and his father Fabio moved it to Geneva in 1977 and began developing new products, including a human-growth hormone. When Genentech came out with a rival based on recombinant-DNA technology, Bertarelli Sr. began funding his own biotech research. That led to the development of a multiple-sclerosis (MS) drug called Rebif, which last year accounted for 39% of Serono's sales.

While Ernesto was at Harvard in the early 1990s, his father sent him company papers so he could keep abreast of what was happening back home. That smoothed the transition when Ernesto took over as CEO. He has streamlined the organization, ending an unwieldy division between operations in Italy and Switzerland, and in 2000 he listed Serono on the New York Stock Exchange. Most riskily, he steered Rebif through a contentious approval process in the U.S. that involved taking on an already authorized rival treatment by Biogen in a head-to-head clinical trial and winning. Biogen had enjoyed a temporary monopoly in the U.S. for its Avonex product under the FDA's "orphan drug" program, meant to encourage research into treatments for uncommon diseases. Serono broke the monopoly, proving by trial that its drug was more effective. Bertarelli's priority today is to fill Serono's pipeline with new drugs so it isn't so dependent on a few products. To leverage and expand its MS expertise, Serono is partnering with other firms to create treatments for associated ailments that afflict MS patients.

A big advantage of Serono's being a family company, Bertarelli says, is that "I'm a strong reference for management. They know where the decisions are coming from." He adds, "People are judged by results, not that you come from three or five generations." Still, being the majority shareholder as well as CEO allows for some freedoms that would be unthinkable at any nonfamily company. Bertarelli spent most of the past six months in New Zealand preparing for the America's Cup, which he won for landlocked Switzerland with his yacht Alinghi. Although he kept in touch by phone, e-mail and videoconference, managing a company from the other side of the world was evidently a challenge, and Bertarelli put in place a deputy CEO who is not a relative to help out.

Baer
JULIUS BAER GROUP

A model for the way a multitude of heirs can preserve a complex business, this ZURICH banking family pools its power (the stock is publicly traded) and then allocates duties with care

Family's Stake: $227 million

A couple of years ago, the descendants of banker Julius Baer more than 100 of them gathered at a Zurich restaurant for a reunion of a remarkable family. Not only does it own a controlling stake in the 112-year-old Swiss bank Julius Baer Group, which manages about $80 billion in assets, but its members still run it too. In May, Thomas Baer, a grandson of Julius', will retire as chairman and hand the post to his nephew Raymond Baer, 43.