Reflections On Prada's Succession Plan And Lessons For Family Firms

Recent news that Prada has agreed to buy Versace in a £1.1billion deal, that brings together two of Italy’s biggest luxury fashion brands, highlights the success delivered by the company’s owners and their determination to keep their business independent and under family control. Duncan Jackson, CEO of Buckles Solicitors LLP, shares his thoughts on succession and the lessons from this recent news for other family firms.

Prada was founded by Mario Prada in 1913 and has transformed from a small leather goods shop in Milan into a $19 billion global empire under the stewardship of Miuccia Prada and Patrizio Bertelli. However, as both founders approach their late 70s, the question of succession has moved to the forefront of the company’s future. Miuccia and Patrizio, who have overseen Prada's rise to prominence, are now preparing to hand over the reins to the next generation – Miuccia’s eldest son, Lorenzo Bertelli.

This transition is not only vital to the future of Prada but also emblematic of the challenges faced by many family-owned businesses, particularly those in the luxury sector. While the Bertellis are taking proactive steps to ensure Prada’s continued independence amidst growing global consolidation, their approach to succession offers invaluable lessons for other family businesses, including those in the UK.

A Plan For Prada’s Future

Miuccia and Patrizio’s succession plan is methodical and aims to secure the long-term health and autonomy of the Prada brand. Lorenzo, who has already taken key leadership roles in marketing and sustainability, is being groomed to take over the company. He now holds 50.5% of the family's holding company, Ludo, which controls 80% of Prada.

This move ensures that Lorenzo is well-positioned to lead the company while maintaining the Bertelli family’s controlling stake in the business.

This decision is not just about ownership but also about leadership. Lorenzo has been deeply involved in the company’s operations, learning the ropes from his parents over time.

This succession plan highlights just one way in which family businesses can handle the migration of ownership across generations, but it is not a method that will suit everyone.

Here, Miuccia’s transfer of nearly all her shares to Lorenzo demonstrates a rare move towards a controlled transition of power - one that will preserve the family’s influence and control while passing the baton to the family’s chosen heir. Many other businesses will instead opt for a more gradual approach which sees transition occur over many years, and not always just to one sole beneficiary.

But of course, the whole process of succession should involve taking a realistic, impartial view of what will work best for the business and the individuals involved in the longer term, and taking the route which will achieve the most desired outcomes in the future.

What UK Family Businesses Can Learn From Prada’s Succession Plan

Prada’s succession strategy offers several key takeaways for family-owned businesses in the UK, especially those looking to secure their future while maintaining control and independence.

• Start Planning Early: Like Miuccia and Patrizio, UK family businesses should start planning for succession well in advance. This ensures that the next generation is adequately prepared and that the transition process does not disrupt day-to-day operations. Delaying decisions can lead to confusion and conflict, as seen in the struggles of brands like Ray-Ban’s parent company Essilor Luxottica, where succession challenges persist after the passing of founder Leonardo Del Vecchio.
  

• Ownership And Control: Miuccia and Patrizio’s decision to transfer ownership to Lorenzo while retaining certain control mechanisms is a smart move. Family businesses should consider mechanisms that allow for generational transfer of power without completely diluting ownership. This can help ensure that the family’s influence remains intact, even as the business evolves.
  

• Diversify Leadership Experience: Lorenzo Bertelli’s current roles in marketing, sustainability, and other key areas of Prada’s operations are crucial in preparing him for the role of CEO. UK family businesses should prioritise leadership development for future generations, ensuring that the next generation gains experience in critical business areas, not just in the family’s legacy.
  

• Be Ready For Change: Succession planning should not be static. As the luxury market shows, businesses must be agile to thrive in today’s environment. Prada’s focus on sustainability and adapting to new consumer trends is a testament to the need for family businesses to embrace change. UK family businesses should also be ready to innovate and evolve as market conditions shift, even if it means taking calculated risks.
  

• Conflict Resolution And Communication: Effective succession planning also requires clear communication among family members. The Bertellis have managed to divide ownership responsibilities clearly among themselves, with Miuccia stepping back but remaining involved in the voting process. Businesses should establish clear lines of communication during succession to prevent disputes during the transition, and if necessary, put in place external advisors to help navigate family disagreements.
  

• Guarding Against External Pressures: Prada’s independence is particularly important in the face of increasing consolidation in the luxury industry. Many family businesses in the UK, especially in manufacturing, agriculture, and retail, face pressure from larger corporations. To maintain independence, they may need to innovate, diversify, and protect their unique family values. Succession planning should factor in how to safeguard the family’s legacy while remaining competitive.

Prada’s approach to succession provides a valuable case study for other family businesses looking to secure their future, regardless of the sector they operate in. By planning early, ensuring leadership development, and preparing for market changes, these businesses should be able to better navigate the numerous challenges involved in passing the baton to the next generation.

While the future may be uncertain for Prada, the Bertellis’ strategic approach to ownership and control may well provide the foundation for the brand’s continued success, and offer some insight for other family businesses also striving to maintain their independence and legacy in an increasingly corporate world.