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Institution building:


What family businesses can learn from Merck


A trio of international family business academics reveal how a modest German pharmacy has evolved into a successful 12-generation dynasty complete with its own family university


A ISSUE 74 | 2018


remarkable 350 years of steady growth and transformation—that’s what the German pharmaceuticals and chemicals company Merck has achieved since it opened its first pharmacy in Darmstadt, near Frankfurt, in 1668.


Merck has now become a €15.3 billion ($17.9 billion)


multinational in 66 countries and employs 53,000 staff. The company has continually evolved its strategy and governance mechanisms, while keeping a large body of 157 family shareholders together. The evolution of its business and governance offer many valuable lessons that family businesses can learn from. So how has the Merck family done it?


BUILDING THE FOUNDATION It all started from modest means. German pharmacist Friedrich Jacob Merck founded Merck and his original small pharmacy was passed from generation to generation for more than 150 years. Heinrich Emanuel Merck, a sixth-generation family member equipped with a scientific education, brought about a major transformation in business by entering into manufacturing of alkaloids and other chemicals in 1827. Merck evolved into an industry- scale pharmaceutical and chemicals maker and introduced quality controls. By the end the 19th century, Merck had established its subsidiaries across continents.


The two world wars proved


to be major setbacks for Merck operations. Several of its profit-making subsidiaries were confiscated by foreign governments. Many other subsidiaries had to be closed down due to shortage of raw materials, capital and labour. However, at both junctures, Merck was able to survive and revive its business by garnering support from the larger players in the industry, among them Boehringer and BASF. Hans Joachim Langmann,


a physicist who married into the Merck family, brought another round of transformations at Merck after he became the chairman of the management board in 1972 and continued until 2000. During this period, Merck established


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