Ahmad Chahidi, Executive Director – Wealth Planning, Julius Baer (Middle East) Limited The current pandemic has focused many of our minds on the future and it is fair to say that succession planning and the transfer of wealth form part of almost every conversation we have with family businesses in the Middle East. This is not a new phenomenon. In the last five years or so, there has been increasing recognition that the family business itself may not be the best preserve of family wealth for the generations to follow. The desire for wealth transition not just to the next generation, but for two or three generations to come, means that many family businesses may have to change their approach and look outside the family to increase that longevity rather than simply relying on the next generation inheriting the family business. It may be that the skillset or appetite of the next generation to take on the family business simply is not there. Similarly, the values of the family business may not align with those second or third generations down the line. For example, the heightened importance of sustainable investing principles in business has come to the fore, predominantly amongst younger generations. Different viewpoints on this topic can make succession planning difficult to manage if younger generations become disenfranchised by current or past practices of the family business. Furthermore, the inheritance laws governing the transfer of assets locally may vary from those applying to assets located abroad. There are also long term and more constant factors to consider such as the well-deserved sense of pride that founders or second-generation successors have for the family businesses they set up. This can make any succession plan difficult, as these figures struggle to pass on the mantle seamlessly. Families in the Middle East tend to be large – their size is on average double that of UK and US families and as per PWC’s Middle East Business survey in 2019. 50% of the families operate a portfolio of businesses in multiple sectors and multiple countries compared to a quarter globally. The survey also highlights that 53% of the respondents felt that succession planning was a key issue for them. The recent economic downturn has also exposed some family businesses to strategic and operational deficiencies. Many family business leaders in the Middle East are reviewing their business portfolios and operating structures in order to figure out ways to become leaner and more competitive.
- Advertisement -
- Advertisement -