Costa until early 1970s

1854 T di Olive
Trading Oli Oil
1920s Production of Olive Oil
Freight Transportation
1930
1930s P
Passenger T
Transportation
t ti
Textile
Real Estate/ Construction
M h i
Mechanics
1960s Cruises
1970s Conglomerate
1
 Core Fundamental Governance
stakeholders goals
26 (male) family Family unity, leave Unlimited partnership
members: 2 to 10% wealth to next (retain control of
shares generation ownership, quality in
7 Elders Create job for the decision making, less
children taxes)
Angelo Costa
Preserve family Individual autonomy in
Employees: managing divisions
control
managers were Boards are staffed by
family friends, Service (not power)
family members
paternalistic family
paternalistic, family- Family comes
like relationships before business Not really working
No group level view and
strategy
2

No consolidated account
 Implications
Nott open to
N t outside
t id skills
kill (no
( professional
f i l managers))
Unclear group-level information
Slow and inappropriate response to market changes
Difficult to raise new capital
Ineffective incentive systems
Inertia
Integrity and family cohesion
Strong values
Reputation

3
 1970s
Elder familyy members die (1976-77)
Inflation due to increase in oil prices
Increased competition from the airline sector and
state-owned companies
p
New accounting rules revealed financial weakness

Restructuringg and ggovernance changes

g
4
 Core Fundamental Governance
stakeholders goals
Costa Family Profit becomes a Holding company
Romanengo (10% of priority (corporation)
the holding company) Managerial Joint appointments in
Arca Merchant (1986) competence matters board of directors
Professionalization ((both familyy members
and outsiders)
Merit is rewarded
G oup Level
Group eve
Accounting system

5
 Implications
Focus on th
F the core business
b i
y of non-family
Entry y members
Recapitalization and restructuring
Some good profitability results but also
disaggregation of the family

6
 The 90s
90s
After the restructuring: focus on the cruise line
b i
business (capital
( i l intensive
i i sector; scale
l economies)
i )
Costa Crociere became the industrial subholding of a
group with over 1800 employees
Top 5 company in terms of worlds market shares:
leader in mediterraean sea and south america
In 1996, 300 family members! Yet, after the
restructuringg onlyy 9 were involved in governance
g and
management: 6 in the TMT and 3 in the board
100% of family wealth invested in the company
Control via holding il Ponte SpA
Costa dividents to be paid to Il Ponte to pay down
d bt remunerate
debt, t shareholders
h h ld andd create t a fund
f d
7
 The 90s
90s
IPO in the 1989
Frech
F h iinvestors
t ini 1993
External resources needed to face debt position. Even after
restructuring debt/equity ratio=2.3

Controlling shareholders of Costa Crociere

Costa family holding (Il Ponte): 30.76%
Chargeurs Paris: 11.89%
Accor: 7.92%
GT EuropeGrowth Fund: 5.17%
Azimut Gestione Fondi: 4.99%
IFIL ((Agnelli
g family):
y) 3.97%
Caisse des Depots et Consignations: 2.24%

Total: 66.94%
66 94%
What about the remaining 33.06%?
8
 The 90s
90s
Remember: capital intensive sector & scale
economies natural tendency towards
concentration
i

Many attempts of acquisition

Competitors tried to buy controlling share of
Costa
Eventually, Carnival bought the controlling stake
f
from the
th family
f il (1997)

9
 Class discussion
How would you describe the family-firm
family firm
relationship before the crisis?
How would you evaluate such a relationship from
the point of view of the family unity and group
long-term
long term growth?
What are the main strategic problems in the
970s?
1970s?
How did Costa manage to survive the crisis?
Are there unsolved problems that may create new
challenges?

10