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When the ties that bind stop short of business

More family-led companies in Singapore prefer to sell out or go for an IPO, compared to their global peers: survey

More family-led companies here intend to sell the business or head for an initial public offering (IPO), compared to their global counterparts, a PwC survey has found.


KEEPING it in the family? Not when it comes to businesses in Singapore.

More family-led companies here intend to sell the business or head for an initial public offering (IPO), compared to their global counterparts, a PwC survey has found.

The reasons range from an overbearing patriarch, to having too many children, in-laws, and cousins who act out family dramas better than at TVB. Families here are also not casting a professional eye over their business operations.

The global survey, which involved 53 family businesses from Singapore, showed that 32 per cent of those polled had plans to exit in the future.

This is much higher than the global average of 20 per cent, and that of Hong Kong, where just 17 per cent of family-led companies are planning to leave their business legacy behind to those that do not share their surname.

Like in Singapore, the situation in China should also whet the appetite of prowling investment bankers. Against expectations that Chinese entrepreneurs would build empires to go beyond cheap manufacturing, an overwhelming 53 per cent of family businesses in China plan to sell or list their business in the future, the same PwC global survey showed.

Of the family businesses in Singapore that want to exit, 17 per cent plans to sell the business to a private equity investor; 13 per cent would sell the business to another company, 9 per cent would offload the business to a management team, and 8 per cent would go for an IPO.

That alone does not indicate that the listing option is least popular, given that many family-run companies are already listed. A listing status is seen as a symbol of success, said Ng Siew Quan, entrepreneurial and private clients leader at PwC Singapore, at a briefing on Thursday.

The greater eagerness to offload the family business in Singapore reflects a generation gap, said Mr Ng. The next generation may not be entrenched in the family business, and have a spread of alternative careers to explore.

Then, there is what Mr Ng dubs the "sticky baton", where the patriarch passes on the business, but keeps his grip on it. "While he may not be holding any official title in the business, when he comes home, over dinner, he will say, 'son, you shouldn't have done that'. That may contribute to some of the reluctance of some family members to take over."

In other situations, families would rather sell the business to preserve harmony, Mr Ng said, noting that some families are still debating over the role of daughters in businesses, and how in-laws should be involved. "There are also many cousins," he added.

Private bankers are seeing similar issues. Lee Woon Shiu, head of wealth planning (trust & insurance), at Bank of Singapore, highlighted the "complex family dynamics" involved in family businesses. "The fear of vocalising future succession plans results in a lack of clarity, which in turn aggravates the power struggles among different family factions, concerns over sibling favouritism and associated sibling rivalry," he told BT.

Singapore's family businesses also do not embrace their societal role as much as their global peers. Just 45 per cent think they play a critical part in job creation, compared to 78 per cent of global family businesses. This is key since family-led firms make up at least 70 per cent of GDP globally.

That is related to the heightened listing status here, since many family companies also operate by following governance standards as a listed firm. "Many of them tend to operate under a corporate veil," said Mr Ng.

But he noted that families have to be educated about being effective shareholders. That role means being able to set aside the goal of preserving the family legacy, and profitability. Without this, professional managers may find it difficult to achieve the best for the family firm.

"They may feel there is a false ceiling in terms of what they set out to do," said Mr Ng.

The PwC family business survey covers family companies in at least 40 countries with a sales turnover of more than US$5 million. The results came from interviews with top executives in more than 2,000 companies between April and August this year.