Family Business Trends

Transcription

1 Family Business Trends MODERN TIMES? Christophe Bernard Global Head of Family Business, KPMG Enterprise April 12,

2 What is generally known about Family Business? 2

3 Family Business creates more than 70% of global GDP annually Family Businesses are discrete Family Businesses perform well Family Businesses have a unique value-based culture Family Businesses have a longterm vision & live longer 3

4 Family Businesses come out of shade Biggest corporations claim their Family Business roots and values We build our future on our family business foundation. The family value makes us unique. We build our future on a solid foundation. Since 1876, the year Henkel was founded, the Henkel family has shown a strong commitment to the company. The family provides us the opportunity to operate in the long term. It also supports us when we have to make difficult strategic decisions. We are committed to leading Henkel with an entrepreneurial spirit, which has been a strong characteristic since our foundation, and that is what ultimately makes the difference in the marketplace. HENKEL Source: 4

5 Family Businesses come out of shade The European Parliament plenary has approved its owninitiative report on family businesses in Europe International & European institutions pay an increasing attention to the sector It recognizes that family businesses are the single biggest source of employment in the private sector and calls for a better family businesses statistics and data. Source: European Family Businesses (EFB) 5

6 and their importance in the economy is even more obvious 40% of the 250 largest companies in France and Germany are family owned Source: Five attributes of enduring family businesses, McKInsey&Company,

7 What have we recently learned? European Family Business Trends: Modern Times?, November 2015 European Family Business Barometer: Determined to succeed (forth edition), September

8 Family Business Trends Solid growth What have we recently learned? Fast strategic changes Professionalization Active internationalization New sources of finance Increasing philanthropy 8

9 Polling questions 1. How do you feel about your family business economic perspective for the next 6 months? 2. Do you plan a strategic change for your family business in the next 12 months? 3. Do you have non-family executives in the management roles? 4. Does your family business have currently activities abroad? 5. Have you already raised financing for your family business from the high-net-worth individuals? 6. How important would you consider philanthropic activities for your company? 9

10 Polling questions 1. How do you feel about your family business economic perspective for the next 6 months? 75% are confident about the future 2. Do you plan a strategic change for your family business in the next 12 months? 3. Do you have non-family executives in the management roles? 4. Does your family business have currently activities abroad? 5. Have you already raised financing for your family business from the high-net-worth individuals? 6. How important would you consider philanthropic activities for your company? plan strategic 41% changes have non-family 76% executives have activities 74% abroad have already raised financing 42% from HNWIs consider philanthropy 34% as important 10

11 1. Family Businesses demonstrate solid growth IN THE COMPANY HAS YOUR have a positive outlook for the future 75%...TURNOVER: DEC 2013 DEC 2014 SEP STAFF NUMBERS: 43% 54% 58% include investments in their short-term strategy (next 12 months) 40% 48% 46% DEC 2013 DEC 2014 SEP 2015 Source: 4 th EFB-KPMG Family Business Barometer, Sept

12 2. Family Businesses are undergoing fast strategic changes #1 Passing the management of the business to the next generation (26%) #2 Sale of the business (21%) 41% of family business owners plan strategic changes in the next 12 months Both choices entail a drastic change in the company s management and/or ownership structure! Source: 4 th EFB-KPMG Family Business Barometer, Sept

13 3. Family Businesses professionalize Family business owners achieve higher professionalization within their companies 88% have put some formal governance mechanisms in place 76% have integrated non-family executives into management roles Key benefits: they bring expertise & knowledge (57%) & they help to professionalize the business (43%) Source: 4 th EFB-KPMG Family Business Barometer, Sept

14 4. Family Businesses rapidly move abroad 74% of family businesses surveyed have activities abroad Besides the domestic and neighboring European markets, priority investment choices are Asia & North America 23% place moving/exporting into the new markets among their top two business priorities for the next two years 23% plan to invest in internationalization in the next twelve months Source: 4 th EFB-KPMG Family Business Barometer, Sept

15 5. Family Businesses open to new sources of financing Family businesses are more amenable to offering equity to the right investors than commonly perceived, especially to a right partner 42% but often these investment partnerships are kept in secret of the family businesses have previously raised financing from HNWIs and 92% of those rate their experience as positive Source: Family matters. Financing family business growth through individual investors, Sept 2014 A right partner primarily means an investor with similar appetite for business risks and returns, similar values and a clear understanding of family business 15

16 6. Family Businesses extend philanthropic activities Philanthropy is evolving in almost all parts of the world among family businesses as well Next-generation members learn the new skills 1/3 of family businesses consider philanthropic activities as important Family members not directly involved in the business make a meaningful contribution Senior-generation members, stepping out of the business, can take over the philanthropy management roles Source: 4 th EFB-KPMG Family Business Barometer, Sept

17 Is everything so bright? 17

18 There are a number of significant challenges which, if not well managed, may handicap companies future growth and success INCREASED COMPETITION (37%) WAR FOR TALENT (33%) A warning sign! an increasing trend since two years (23% in Dec 2013) DECLINE IN PROFITABILITY (32%) Firmly in top 3 of the most pressing challenges since two years Source: 4 th EFB-KPMG Family Business Barometer, Sept

19 Size matters! The pressure is higher on small businesses than on large ones* 66% Confident in future 81% Increased turnover in 47% the last 6 months 64% Small businesses have also less activities abroad Source: 4 th EFB-KPMG Family Business Barometer, Sept 2015 *small businesses are defined as the ones with less than 10 million in turnover. Large companies are defines as the ones with more than 50 million in turnover 19

20 Keep or sell? 9% (approximately) of the owners plan to sell the business in the next 12 months Number of family business owners ready to part with the company has doubled since two years ago Source: 4 th EFB-KPMG Family Business Barometer, Sept

21 When to pass the business on? 21

22 Impact of tax regimes on family business succession Generally countries are supporting and encouraging investment and growth in family business, with low tax liabilities for the transfer of business to the next generation Where tax is due, many countries have mechanisms that allow for payments to be diminished or deferred Global Family Business Tax Monitor, April reserved. KPMG The International KPMG name Cooperative and logo ( KPMG are registered International ). trademarks KPMG International or trademarks provides of no KPMG client International services and is Cooperative a Swiss entity (KPMG with which International). the independent member firms of the KPMG network are affiliated

23 Family Business Succession upon Inheritance and Retirement CASE STUDY John Smith has owned his Family Business for over ten years. The business is now valued at 10 million (which includes 5 million of goodwill). All assets in the company are used for the purposes of the business. John s wife Sarah died in 2010 and he has one daughter, Anna, who is 35 years old. 1 INHERITANCE John died in early 2015 and his will passed the business to Anna, who intends to continue the business for the next 20 years or so. What is the tax impact of John s death? RETIREMENT In 2015, John, who is getting older, wished to retire. He decides to gift Oakwood to Anna, who intends to continue the business for at least the next 20 years. The gift is not related to any employment of Anna in the business. 2 What is the tax impact of John s gift in 2016 presuming that John is still alive? 2016 reserved. KPMG The International KPMG name Cooperative and logo ( KPMG are registered International ). trademarks KPMG International or trademarks provides of no KPMG client International services and is Cooperative a Swiss entity (KPMG with which International). the independent member firms of the KPMG network are affiliated

24 Tax regimes around the world vary greatly Transfer through inheritance (before exemptions) From 0 to over 4.5 million for transfer of family business through inheritance USA (high tax state) 4.7 million 14 countries apply no tax on a family business transfer through inheritance > 3 million 1 million - 3 million < 1 million No taxes Australia 4.6 million 24

25 Tax regimes around the world vary greatly From 0 to over 5 million for transfer of family business on retirement Transfer on retirement (before exemptions) 10 countries apply no tax on a family business transfer on retirement Spain 5.5 million Japan 5.5 million > 3 million 1 million - 3 million < 1 million No taxes 25

26 Exemptions & reliefs are complex although generous Transfer through inheritance The tax landscape changes dramatically when introducing country specific tax exemptions and reliefs Greece 0.9 million The exemptions provided create a far more level playing field in the taxation of business assets across all types of economies Greece 0.9 million 26

27 Exemptions & reliefs are complex although generous Transfer on retirement Greece 0.9 million By decreasing the tax burden, governments encourage family members to keep their assets and business within the generations and to grow and develop it Greece 0.9 million Sometimes conditions that have to be met for the exemptions to apply, including a minimum period of time that the shares should have been held by the donor prior to the gift and how long the business should be continued post-transfer 27

28 Several higher & lower tax countries are geographically adjacent to each other Sweden* Finland 959,500 Estonia* Transfer through inheritance (before exemptions) Norway 42,500 Germany 2,300,000 Netherlands 4,121,361 Latvia* Lithuania 1,000,000 Poland* United Kingdom 4,000,000 Belgium 2,652,000 Ireland 3,225,750 Isle of Man* Switzerland 3,600,000 France 4,217,394 Luxembourg* Czech Republic* Slovakia* Austria 20,000 Spain 3,322, 697 Portugal 1,000,000 Italy 250,000 Serbia* Bosnia and Herzegovina* Croatia* * Country applying no taxes on a family business transfer through inheritance (before exemptions) Greece 956,500 Malta 500,000 Cyprus 600,000 > 3 million 1 million - 3 million < 1 million No taxes 28

29 When to pass the business on? INHERITANCE While the tax on inheritance is higher that on a lifetime transfer (in three countries), a thought should be given to advanced planning to ensure the tax implications of all the available options are understood RETIREMENT Ten countries apply a higher tax on the on retirement than on inheritance (sometimes of over 1 M), preferring assets remaining in the hands of the older generation for as long as possible 29

30 When to pass the business on? While from a tax perspective it may be more beneficial to transfer the business to the family members through inheritance, this can lead to the younger generation feeling frustrated that they do not own the business they are working to help grow 30

31 Important to consider! The difference in tax treatment may impact considerably the owner s decisions about the future of the business Inheritance OR Retirement? Relocation Unfavorable tax policies may influence a business to relocate impacting the local economic growth Timely preparation Lack of timely preparation may cost families a considerable sum or even put the ongoing ownership of the business at risk 2016 reserved. KPMG The International KPMG name Cooperative and logo ( KPMG are registered International ). trademarks KPMG International or trademarks provides of no KPMG client International services and is Cooperative a Swiss entity (KPMG with which International). the independent member firms of the KPMG network are affiliated

32 Family businesses are not only the backbone of our economy today but also its future 32

33 The future of family businesses seems to be bright! Family businesses correspond well to the entrepreneurial spirit of the new generation Generation Z By 2025, family businesses from the emerging markets will represent 40% of all world s enterprises with $1 bn in sales Family businesses are increasingly proud to be a family-owned business and will continue the family legacy & tradition Family businesses provide 50% to 80% of jobs in the majority of countries around the world 33

34 Polling questions And what about the new trends in Greece? 34

35 Polling questions 1. How do you feel about your family business economic perspective for the next 6 months? 75% are confident about the future 2. Do you plan a strategic change for your family business in the next 12 months? 3. Do you have non-family executives in the management roles? 4. Does your family business currently have activities abroad? 5. Have you already raised financing for your family business from the high-net-worth individuals? 6. How important would you consider philanthropic activities for your company? plan strategic 41% changes have non-family 76% executives have activities 74% abroad have already raised financing 42% from HNWIs consider philanthropy 34% as important 35

36 EUROPEAN FAMILY BUSINESS BAROMETER (fifth edition) Economic outlook Strategic changes New trends Future investments Business priorities Succession & generational change Launch of the questionnaire Release - May September 2016 Business model Challenges & risks 36

37 Thank you Christophe Bernard Global Head of Family Business, KPMG Enterprise KPMG Global Centre of Excellence for Family Business 37